The FCRA and Spokeo: Why This Matters to Employers

About 5 min

The FCRA and Spokeo: Why This Matters to Employers


Our Closer Look articles offer an in-depth analysis of background screening topics currently affecting employers. 

On Monday, April 27, 2015, the U.S. Supreme Court agreed to grant review in the case Spokeo, Inc. v. Robins, No. 13-1339 (U.S.). Why is this important to employers?  

For a moment let’s set aside the long history of Spokeo, multiple court rulings, and the legalese. The core question, in layman’s terms, is whether a lawsuit may move forward when no actual harm is claimed. Or, is alleged failure to meet the legal requirements of the law sufficient to allow a case to proceed. The Supreme Court has agreed to address this question by reviewing the Spokeo case.

This question – whether actual harm must occur – matters to employers because class action lawsuits (almost 100 in the past 12 months alone) have been brought against employers in regard to their background screening practices. Many of these class actions are based on the employer’s screening program allegedly not meeting the requirements of federal law, even though no actual damages are claimed. Many employers have made multi-million dollar settlements in these cases. If the Supreme Court rules actual damages are necessary, cases like these against employers would likely become much less frequent because proving actual harm would be difficult and time consuming. Employers would be less likely to be sued in a class action over their background screening practices thereby reducing legal costs, settlements, business disruption, and brand damage.

The Spokeo case will be heard by the Court sometime in its next session, anticipated to run October 2015 through June 2016. Obviously a decision is not imminent, but the agreement by the Supreme Court to hear this case is a positive sign for employers.

More detail … the FCRA (Fair Credit Reporting Act, 15 U.S.C. 1681 et seq.) governs consumer reports, consumer reporting agencies, and users of such reports. Translation – the FCRA governs background checks prepared about individuals, the background screening companies that prepare those reports, and organizations that use the information in background reports. A background check report prepared by a background screening company and used by an employer in an employment decision falls squarely under the FCRA. Many legal claims have been brought against employers because their background screening program allegedly failed to meet FCRA requirements and many multi-million dollar settlements have been made by employers in these cases.

The Spokeo matter began in July of 2010 when Thomas Robins filed a lawsuit against Spokeo (Robins v Spokeo).  Robins claimed his FCRA rights were violated because Spokeo posted searchable database information about him and the information was incorrect. Allegedly Spokeo took no steps to comply with the FCRA, specifically the FCRA’s maximum possible accuracy requirement, even though prospective employers could search the database when making an employment decision. Robins claimed no actual damages; meaning, for example, he didn’t claim he was denied employment because of the posted information. Rather, Robins claimed he suffered damages simply because Spokeo failed to follow the FCRA and, as a result, violated his legal rights. Robins sought class certification on the premise that many employers used Spokeo information when making employment decisions, thus violating the FCRA rights of many people (potentially hundreds of thousands).

The Spokeo case has been heard by the federal district trial court and federal appeals court. It has been a long legal road with decisions being made and decisions reversed. The legal road has now taken Spokeo to the Supreme Court. The specific legal question presented to the Court is: Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.

The Court’s decision in this case is likely to have impact far beyond the FCRA. For employers, however, a critical question remains whether actual harm must occur for a court to confer standing (allow a case to proceed) or if alleged failure to meet statutory requirements is by itself sufficient for a claim. Cases similar to Spokeo have been heard in other federal appeals courts and decisions among the courts are in conflict. This disagreement reinforces the need for a Supreme Court decision.

Agreeing to hear a case, of course, does not guarantee a decision that will benefit employers. Had the Supreme Court declined to hear the case, however, the lower court decision unfavorable to employers (and others) would have been allowed to stand, thus keeping the door open for more FCRA-based class actions against employers.

EBI will continue to monitor and report on cases that affect an employer’s rights to conduct compliant background checks. Background checks continue to reduce the threat and impact of negligent hiring litigation while providing insight into candidates that may affect the safety and security of their business.

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"Spokeo Logo" by Spokeo - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Employment Background Investigations is a technology driven leader in domestic and global pre-employment background checks, drug testing, occupational health screening and I-9 compliance. We specialize in development, implementation and management of customized employment screening programs for large and multi-national clients. We are dedicated to information security.  EBI is the only NAPBS Accredited background screening company in the world to hold both an ISO 27001:2005 certification for information security and an ISO 9001:2008 certification for Quality Management.

All content provided by EBI is published for the convenience of its readers and should never be deemed as legal guidance or advice.  Always consult your legal counsel for specific advice on state laws and industry regulations.

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