FCRA Lawsuits Will Still Target Employers and Background Check Firms Despite Spokeo Ruling in 2020

ESR Top Ten Background Check Trends
ESR Top Ten Background Check Trends

Written By ESR News Blog Editor Thomas Ahearn

Employers and background check firms will continue to be targeted by class action lawsuits that claim alleged violations of the federal Fair Credit Reporting Act (FCRA) in 2020 despite the Supreme Court ruling in Spokeo v. Robins that led some cases to be dismissed, according to the “ESR Top Ten Background Check Trends” for 2020 compiled by leading global background check firm Employment Screening Resources® (ESR).

An examination of 146 successful FCRA class action lawsuits compiled by a national policy resource center found that employers have paid out $174 million over the past decade to settle litigation claiming they violated the FCRA. The background check firms providing background check reports about job applicants to employers have paid out another $152 million when sued directly under the FCRA.

Class action lawsuits that claim violations of the FCRA – sometimes even mere technical violations of the statute – can indeed be costly to employers. In 2018 and 2019 alone, 7-Eleven paid $1.9 million, Delta Air Lines paid $2.3 million, Omincare paid $1.3 million, a subsidiary of PepsiCo paid $1.2 million, and Frito-Lay Inc. paid $2.4 million to settle class action lawsuits over alleged violations of the FCRA.

Consumer reporting agencies (CRAs) – another name for background check providers – also lose money in FCRA lawsuits. In November of 2019, the Consumer Financial Protection Bureau (CFPB) – a government agency that enforces the FCRA – required a CRA to pay $8.5 million to resolve an FCRA lawsuit, while a federal judge in Florida approved a $3.6 million settlement in an FCRA class action lawsuit filed against another CRA.

However, some FCRA class action lawsuits were dismissed or decertified under the May 2016 Supreme Court ruling in Spokeo v. Robins – where a man filed a lawsuit when “a people search website” gave inaccurate information about him – that found consumers must prove “an injury in fact” in lawsuits for alleged “bare” violations of federal statutes to establish standing under Article III of the United States Constitution.

In September 2019, a District Court in Virginia dismissed an FCRA class action lawsuit against a CRA citing the Spokeo ruling that a plaintiff must have “an injury in fact.” In October 2019, a California federal judge decertified a class of 6.5 million applicants in an FCRA class action lawsuit filed against Walmart, finding the plaintiffs did not suffer an injury sufficient enough as required under Spokeo v. Robins.

“In no way did the Supreme Court decision in the Spokeo case mean employers could relax obligations for, or ignore the technicalities of, the FCRA,” explained Attorney Lester Rosen, founder and chief executive officer (CEO) of Employment Screening Resources® (ESR). “Employers will always need to ensure compliance with their FCRA obligations and work with a background check provider that understands the FCRA inside and out.”

Employment Screening Resources® (ESR) offers two complimentary white papers – “Common Ways Prospective or Current Employees Sue Employers Under the FCRA” and “Common Ways Consumer Reporting Agencies are Sued Under the FCRA” – that closely examine the many causes that can lead to lawsuits and shows how employers and the CRAs that they work with can both avoid costly litigation.

Since 2008, Employment Screening Resources® (ESR) has selected influential and emerging background check trends that have impacted the background screening industry. Each trend for 2020 will be announced via the ESR News Blog and listed on the “ESR Top Ten Background Check Trends” web page available at www.esrcheck.com/Tools-Resources/ESR-Top-Ten-Background-Check-Trends/.

NOTE: Employment Screening Resources® (ESR) does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.

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