Parties Seek Court Approval of $950,000 Settlement in McDonald’s Background Check Class Action

Lev Craig and Shelby Krzastek

Earlier this week, on March 6, 2017, class members and McDonald’s management requested final approval of a $950,000 proposed settlement in James Wesley Carter v. Shalhoub Management Co., et al., a class action filed in the U.S. District Court for the Central District of California. The approximately 2,300 class members allege that Shalhoub Management Co. (“Shalhoub”), a California-based McDonald’s franchise operator, did not comply with its obligations under the Fair Credit Reporting Act (“FCRA”) when it conducted background checks on employees and job applicants without their knowledge and used those background checks to determine whether to hire or terminate those individuals.

The FCRA is a comprehensive statute that regulates how consumer reporting agencies store, disseminate, and use consumer information. Under the FCRA, employers requesting background information, such as credit reports or criminal background checks, from job applicants must get the applicant’s written permission and inform applicants in writing—in a separate notice not included in the employment application—that the results of the background check may be used to make employment decisions. If an employer then takes an adverse action against an employee or refuses to hire a job applicant based on the received background information, the employer must provide the employee or applicant with a copy of the relevant report, inform the individual that they were rejected or terminated based on the report, and provide an opportunity to dispute or explain any inaccurate or negative information.

According to the Carter complaint, named plaintiff James Wesley Carter applied for a job and was hired at a McDonald’s restaurant owned and operated by Shalhoub. Mr. Carter alleges that he was terminated shortly after his hire when a background check that had been conducted without his knowledge incorrectly reported that he had previously been convicted of a robbery. Mr. Carter brought suit in federal court in July 2015, claiming that Shalhoub had violated the FCRA by failing to notify him and other job applicants at roughly 20 Shalhoub-managed McDonald’s locations that the company would subject them to background checks and use the results of these checks to decide whether to hire applicants or fire employees—all without allowing applicants and employees to dispute erroneous information.

In October 2016, U.S. District Judge Michael W. Fitzgerald preliminarily approved a $950,000 settlement in Carter. The proposed agreement would allocate $276 to each of the class members, in addition to a higher incentive payment allocated for Mr. Carter. The final hearing on the proposed settlement is scheduled for next Monday, March 13, 2017.

In New York City, workers are protected by the Fair Chance Act, in addition to their protections under the FCRA. The Fair Chance Act prohibits New York City employers from inquiring about a job applicant’s criminal history during the hiring process and sets forth regulations and procedures for employers who later make employment decisions based on an employee’s criminal record. If your employer has violated your rights under the FCRA or the Fair Chance Act, contact The Harman Firm, LLP.