Hoping it would stem an ever-rising tide of class action litigation under the Fair Credit Reporting Act (FCRA), employers and their background screening partners have been waiting for the U.S Supreme Court to rule in Spokeo, Inc. v. Robins. The question presented to the Court was whether actual damages must occur in order for a legal complaint to have “standing” to sue, meaning there is a basis for the plaintiff to challenge the conduct in court.
As readers of this Screening News Network blog will recall (perhaps painfully), many employers and/or their screening partners have faced class action litigation based upon “technical violations” of the FCRA and have subsequently paid multi-million dollar settlements.
Technical violations generally refer to failure to meet specific requirements of the FCRA, but such failure often does not result in any actual harm. A good example of a common technical violation without actual harm is failure to provide a clear and conspicuous disclosure in a standalone document as required by the FCRA; i.e., a disclosure that includes a non-related sentence or two, but the non-related sentences don’t result in any actual damage to the person receiving the disclosure. So the question to the Supreme Court was whether the technical violation was sufficient for a legal action.
The Court said a technical violation was not sufficient to establish standing, stating that a plaintiff must allege an injury that is both “concrete and particularized.” The Supreme Court found that the lower court hearing the case (The Ninth Circuit) analyzed the “particularized” requirement, that requirement being the plaintiff “personally has suffered some actual or threatened injury.” The Supreme Court noted, however, that the lower court did not analyze the “concrete” requirement, meaning an injury must “actually exist” as a result of the defendant’s conduct. As a result, the Court sent the Spokeo case back to the Ninth Circuit Court, effectively directing the court to determine whether the concrete harm requirement was met in conjunction with particularized harm. Whether the lower court can somehow find “concrete” damage in what appears to be a purely technical violation remains to be seen.
The Supreme Court ruling is mostly good news for employers and background screening companies. The Court clearly stated that “standing requires a concrete injury even in the context of a statutory violation” and that a “bare procedural violation, divorced from any concrete harm” is not sufficient to establish standing. However, the Court also noted that concrete is not “necessarily synonymous with tangible” and wrote, “Although tangible injuries are perhaps easier to recognize, we have confirmed in many of our previous cases that intangible injuries can nevertheless be concrete.”
It’s unlikely the Spokeo decision will stop FCRA-based class action litigation, but it should serve to at least slow it down. It will require plaintiff’s bar to become more creative in establishing concrete injury or “intangible injuries” to support technical violations.
So what’s an employer to do? Ensure your internal processes are fully compliant with applicable law and regulation and, to the extent possible, based on best practices. And, ensure your background screening partner is doing everything possible to protect you, your employees and applicants. Not sure how to select the best possible screening partner? Download the guide, below.