FCRA Lawsuits Will Remain a Potential Threat to Employers After Supreme Court Decision in Spokeo Case

 

Written By ESR News Blog Editor Thomas Ahearn

On May 16, 2016, the Supreme Court of the United States ruled in the case of Spokeo, Inc. v. Robins that consumers must prove “concrete injury” in class action lawsuits for alleged “bare” violations of a federal statute. However, the fact that class action lawsuits involving the federal Fair Credit Reporting Act (FCRA) that governs background checks in the U.S. will remain a potential threat to employers despite recent court rulings dismissing FCRA lawsuits and citing the Spokeo decision as the reason is Trend Number 8 in the Employment Screening Resources® (ESR) 10th annual ‘ESR Top Ten Background Check Trends’ for 2017.

“In no way does the Spokeo decision mean that employers can relax when it comes to FCRA compliance. It doesn’t mean that employers have a carte blanche right to ignore the technicalities of the FCRA. Employers certainly still need to ensure that they are in compliance with their obligations and they are working with background firms that understand the FCRA inside and out,” says ESR founder and CEO Attorney Lester Rosen. The list featuring emerging and influential trends in the background check industry for 2017 will be available at www.esrcheck.com/ESR-Top-Ten-Background-Check-Trends.

The case of Spokeo, Inc. v. Robins involved a Virginia man who filed a class action lawsuit against Spokeo – an online “people search engine” that sells publicly available information about individuals – for alleged violations of the FCRA. The lawsuit claimed Spokeo violated the FCRA by publishing inaccurate information about the age, education, marital status, and professional experience of the plaintiff. The Supreme Court ruling sent the case back to the Ninth Circuit Court of Appeals stating its Article III standing analysis in a February 4, 2014, decision to reverse a dismissal of the case was “incomplete.”

In a 6-2 decision in the opinion delivered by Justice Samuel Alito – with Justices John Roberts, Anthony Kennedy, Clarence Thomas, Stephen Breyer, and Elena Kagan joining Alito, and Justices Ruth Bader Ginsburg and Sonia Sotomayor dissenting – the Supreme Court stated that “Article III standing requires a concrete injury even in the context of a statutory violation. For that reason, Robins could not, for example, allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.”

In explaining that there must be three elements to an Article III standing analysis, the Supreme Court stated: (a) A plaintiff invoking federal jurisdiction bears the burden of establishing the “irreducible constitutional minimum” of standing by demonstrating (1) an injury in fact, (2) fairly traceable to the challenged conduct of the defendant, and (3) likely to be redressed by a favorable judicial decision. The injury-in-fact requirement requires a plaintiff to show an injury is “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.”

The Supreme Court ruled that the injury to Robins needed to be “concrete” and the Ninth Circuit had not analyzed if the alleged violations of FCRA had created a “degree of risk sufficient to meet the concreteness requirement.”  Although an injury can be intangible, there still must be a risk of harm above and beyond a technical violation. The Supreme Court also noted that: Because the Ninth Circuit failed to fully appreciate the distinction between concreteness and particularization, its standing analysis was incomplete.

The opinion notes that while the Supreme Court “takes no position on the correctness of the Ninth Circuit’s ultimate conclusion,” that the Plaintiff “cannot satisfy the demands of Article III by alleging a bare procedural violation.” The opinion also states that: “Robins cannot satisfy the demands of Article III by alleging a bare procedural violation. A violation of one of the FCRA’s procedural requirements may result in no harm.” The Supreme Court opinion in the case of Spokeo, Inc. v. Robins is at www.esrcheck.com/file/SCOTUS-Spokeo-v-Robins-Opinion.pdf.

As reported by ESR News, the Supreme Court heard oral arguments on November 2, 2015 in the case of Spokeo, Inc. v. Robins on whether or not a plaintiff had the legal right, or “standing,” to bring a class action lawsuit for a technical violation of the FCRA if that individual suffered no actual concrete harm from the violation. Under the FCRA, consumers may claim damages from $100 to $1000 if a company publishes inaccurate information about them. More information about the case is at www.scotusblog.com/case-files/cases/spokeo-inc-v-robins/.

“Although the Supreme Court decision in Spokeo does not put the standing to sue issues completely to rest, it does appear that the Court’s ruling may well slow down class action lawsuits based solely on highly technical violations of the Fair Credit Reporting Act where in fact no one was harmed,” Rosen said at the time. “It seems to lean in the direction of the ‘no harm, no foul’ rule.   However, it would not appear to impact a class action lawsuit, for example, against a screening firm that did not use reasonable procedures in reporting criminal cases where consumers were actually or likely to be harmed.”

Several FCRA lawsuits have been dismissed by courts citing Spokeo as the reason for dismissal. In August 2016, a Wisconsin federal judge dismissed a class action lawsuit against Time Warner Cable over alleged FCRA violations by finding the plaintiff could not show he suffered “concrete harm” from the background check process in a decision that cited the Spokeo ruling. In granting the Motion to Dismiss, U.S. District Judge Pamela Pepper found the plaintiff “has not alleged a concrete harm resulting from the defendant’s alleged violation” and “does not have standing, and the court must dismiss the case.”

In October 2016, a California federal court judge dismissed a class action lawsuit against Lyft over alleged violations of the FCRA during the transportation network company’s background check process. In the Order Granting Motion to Dismiss, Chief Magistrate Judge Joseph C. Spero agreed with Lyft’s assertion that the plaintiff lacked standing under Article III of the U.S. Constitution, citing the Supreme Court decision in the Spokeo case. Judge Spero wrote in the order: Under Spokeo, a plaintiff who seeks to assert a claim under the FCRA is required to allege facts showing a concrete injury.

In an October 2016 article entitled “Court Decisions Don’t Alleviate Employer Vigilance” on the Society of Human Resource Management (SHRM) website, Rosen told SHRM Online Manager/Editor Roy Maurer that employers should not be “lulled into a false sense of security” and “must still be vigilant with compliance.” Maurer interviewed Rosen and other FCRA compliance experts for the article, and they all agreed that employers “can’t let their guard down about complying with background screening rules despite recent court decisions.” Rosen said the following about any fallout from the Spokeo ruling in the article:

Rosen explained that if the Lyft decision and others like it are indicative of a barrier to being able to sue unless there are actual damages to plaintiffs, (a few things might happen). First, plaintiffs’ attorneys will focus on those cases that contain actual harm, such as employers running employment screens without consent or background check firms delivering reports with erroneous information. Second, if the courts are no longer seen as a way to regulate procedural requirements of the FCRA, the regulatory agencies – the Federal Trade Commission and the Consumer Financial Protection Bureau – will fill the vacuum. (Third, more cases may be brought in state courts.)

In response to the rising trend of FCRA class action lawsuits, Rosen wrote a whitepaper entitled Common Ways Prospective or Current Employees Sue Employers Under the FCRA that includes the top nine reasons why businesses face FCRA lawsuits from applicants and employees. Rosen writes that: “More often than not, employers are sued for violating FCRA 101 – simple rules and procedures that are clearly set out in the law.” The complimentary whitepaper from ESR is available for download at www.esrcheck.com/Whitepapers/Ways-Employees-Sue-Employers-Under-FCRA/.

Rosen also wrote a second whitepaper for employers who work with third party Consumer Reporting Agencies (CRAs) to obtain background checks entitled Common Ways Consumer Reporting Agencies are Sued Under the FCRA. In this whitepaper, Rosen describes eighteen practices that can give rise to FCRA class action lawsuits against CRAs that employers must keep in mind when choosing a CRA to help them navigate the legally-sensitive area of employment background checks. The complimentary whitepaper from ESR is available for download at www.esrcheck.com/Whitepapers/Ways-CRAs-Sued-Under-FCRA/.

ESR Top Ten Background Check Trends for 2017 Webinar

Employment Screening Resources® (ESR) founder and CEO Attorney Lester Rosen will host a live complimentary webinar entitled ‘ESR Top Ten Background Check Trends for 2017’ on Wednesday, January 18, 2017, from 11:00 AM to 12:00 PM Noon Pacific Time. To register for the free webinar, please visit https://attendee.gotowebinar.com/register/733293271056375556.

The webinar is approved for 1.0 (HR (General)) recertification credit hours toward PHR, SPHR, and GPHR recertification through the HR Certification Institute (HRCI). The webinar is worth 1.0 Professional Development Credit (PDC) from the Society for Human Resource Management (SHRM) for the SHRM Certified Professional (SHRM-CP™) and SHRM Senior Certified Professional (SHRM-SCP™).

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