No Harm, No Foul? Supreme Court To Rule On FCRA Compliance

Compliance   |   

If you’re not up-to-date on the Spokeo v. Robins case, you need to be. The looming Supreme Court decision has significant implications for background screeners and any users of employment background checks – including employers.

The question posed in this case is huge:  “Does the mere fact that Spokeo violated the Fair Credit Reporting Act [FCRA], without more, give Thomas Robins a legal right ... to sue?”  

In other words, can a plaintiff, who has suffered no actual harm, really sue for and win monetary damages simply because the law allows damages to be awarded?

Robins claims that Spokeo, a popular people search website, published inaccurate information about him on its search service. According to the complaint, Spokeo reported that he was married with children, employed in a professional or technical field, and had an advanced degree.

Why The FCRA Applies

The complaint says that Robins was “concerned that the inaccuracies would affect his ability to obtain credit, employment, insurance, and the like.” And that’s why he claims he’s entitled to sue for statutory damages under the FCRA.

The FCRA regulates consumer reporting agencies (CRAs) –  which includes companies that furnish background checks. One of the FCRA’s chief requirements is for CRAs to use procedures that ensure “maximum possible accuracy.

Spokeo did, in fact, publish inaccurate information about Robins, and Robins’s case alleges that Spokeo failed to use procedures that ensure maximum possible accuracy.

What The Spokeo Case Means For Background Checks

The background screening industry has suffered at the hands of lawyers over the past few years. Many job seekers have joined class actions or filed one-off lawsuits against background screening companies based on inaccurate information on employment background checks.

Sometimes, these claims are justified by careless or reckless procedures that result in the communication of harmful, inaccurate information. Often, though these claims are based on typos or mistakes that result in no harm whatsoever. In fact, even in cases when the candidate is offered the job, the inclusion of even the most benign inaccuracies on a background check has prompted lawsuits demanding costly “damages” from the background screener.

It’s not unusual for these candidates to allege pain and suffering and threaten punitive damages against screeners as a way to legitimize settlement demand of six figures – even in cases in which the plaintiff was hired and suffered no real harm.

This aggressive litigation has effectively turned the FCRA into a strict liability statute under which any inaccuracy leaves a CRA defenseless to lawsuits. The courts have conferred significant power to consumers under the FCRA, even though the Federal Trade Commission and Consumer Financial Protection Bureau have explicitly stated that maximum possible accuracy does not require CRAs be 100% accurate all the time.

Why The Case Matters To Employers Who Use Background Checks

The ease with which attorneys can try these cases is one reason why there’s so much FCRA litigation today. Statutory damages let plaintiffs avoid having to demonstrate actual harm. Under the current FCRA statutory damages litigation scheme, the only evidence required for a plaintiff to recover money damages is, essentially, the background check itself. Lawyers are taking advantage of the statute for easy wins.

The Best Possible Outcome

If the Supreme Court decides to require consumers to demonstrate harm from a background check before filing suit, lawyers will likely think twice before pursuing background screening lawsuits against CRAs and employers. Consumer attorneys won’t have the  incentive to seek out class representatives and serial plaintiffs to pad their pockets, because litigation won’t  be as easy.  Actual harm, if not difficult to prove, is at least time-consuming to establish and tough to communicate to a jury. In short, it’s not an easy win.

Why FCRA Compliance Matters Regardless Of The Decision

No matter what happens when the Court decides the case (which may happen as soon as April 19) employers and CRAs must remain committed to FCRA compliance.

While this case might limit the number of people able to successfully sue under the FCRA, it won’t affect the obligations of CRAs and employers to follow the law’s requirements. This means employers must continue to provide appropriate disclosure and authorization forms (consent forms) and follow adverse action procedures.

The bottom line: Spokeo might reduce the risk of lawsuits against employers and CRAs, but both must follow the law and provide consumers a fair, transparent, and reliable background screening process.

Still, a decision in favor of Spokeo will turn the tide of litigation in the pre-employment screening and hiring space, and give both background screeners and employers room to breathe.

Want to learn more about reducing the risk of FCRA lawsuits? Watch the webcast featuring Elizabeth McLean or download the transcipt.

Elizabeth McLean

Elizabeth McLean

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At GoodHire, Elizabeth McLean monitors all things FCRA and EEOC. That means she follows new legislation and court decisions and advises the company on processes that follow compliance best practices. Elizabeth earned an advanced FCRA certification from NAPBS in 2015.

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