You can now add K-Mart to the list of big businesses that have fined for violating the Fair Credit Reporting Act. The major retailer reached a settlement that will pay three million dollars in damages to more than 64,500 members of a class-action suit. The lawsuit alleged that K-Mart violated federal law by failing to notify job applicants that K-Mart was going to take adverse action based on the applicants’ background reports.
The Fair Credit Reporting Act requires employers to utilize the “adverse action” process: Each time an employer rejects a job applicant due to information found in their background check, they must notify the applicant and allow the applicant to dispute the information (otherwise known as the “applicant dispute process” or “pre-adverse / adverse action process”).
K-Mart was also accused of violating the FCRA by not allowing sufficient time for the applicants to dispute the information contained in their background. Federal law states that job applicants must be provided with five business days to contest or dispute any information reported on them in their background check.
The complaint also accused K-Mart of willfully ignoring the FCRA, claiming “Defendants knew or should have known about their legal obligations under the FCRA. These obligations are well established in the plain language of the FCRA and in the promulgations of the Federal Trade Commission.”
K-Mart and its parent company Sears Holding Corp. have denied any wrongdoing but agreed to the $3 million settlement in order to avoid going to trial.