Articles & Blog

The Fair Credit Reporting Act and its Threat to Employers

February 17, 2017

Since being put into legislation, the Fair Credit Reporting Act (FCRA) has been a thorn in the side of employers since its inception due to the very real possibility of class action lawsuits by potential employees. We have seen it time and again, a potential employee suing an employer for damages due to a background check, and citing breach of privacy or a host of other issues they need to be covered. However, in May 2016, a precedent was finally set for those seeking damages from companies who refused to hire due to a criminal record check. Spokeo Inc v. Robins established that consumers must prove ‘concrete injury’ in class action lawsuits for alleged ‘bare’ violations of a federal statute. We are going to review the case, and then dive into the threats that still exist via the FCRA for employers.

The court ruled in favor of Spokeo 6-2, and in fact, they dove deeper into the law then most Federal Courts have dared to. They 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. Thus, the injury requirement requires a plaintiff to not only show the injury as concrete and particularised, but actual or imminent rather than hypothetical. They continued along this discourse, and stated that an injury can be intangible, there still must be a risk of harm above and beyond a technical violation. You may be asking yourself, well what does that mean for me and my business?

It means that you are not safe, although the court has slowed down the possibilities of class action suits, suits can still come your way if the perceived level of injury is beyond a technical violation. Now saying that there are a few things that may happen with these types of cases. 1) Plaintiffs’ attorneys may focus on cases that caused legitimate harm, such as running screens without consent or background check firms that deliver reports with erroneous information. 2) If courts are no longer a viable way in which the FCRA is going to regulated, the Federal Trade commission and the Consumer Financial Protection Bureau will fill that void. 3) Cases could be brought forward in state court, rather than federal court.

At this moment we are not 100% sure on what is going to happen with FCRA trials, and cases. It is a complex question, and we are still waiting for an answer. As an employer, you have to be vigilant in your background checks, and ensure the companies you use, are doing it correctly. Only hire those companies who have the highest degree of accuracy, and ensure that your managers or human resource staff have permission from the potential hire to complete the check. Remember, a single screw up that caused harm can cost your companies millions, and that is something as an employer you should want to avoid at all costs.

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