Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
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The continued filing of lawsuits against employers under the FCRA underscores the need for in-house counsel, Human Resources, and Talent Acquisition to comply with the statute, especially the “pre-adverse action” notice requirement in 15 U.S.C. § 1681b(b)(3)(A).1
Employers have had some recent success knocking FCRA claims for “informational injuries” out of federal court by contesting the plaintiff’s “standing” under Article III of the U.S. Constitution.2 These victories hinge on the federal constitutional requirements for a plaintiff to pursue any claims in federal court (e.g., injury-in-fact), not on the merits.3 Courts remain split on the rules for standing to bring pre-adverse action notice claims, however, and it is a mistake to assume the standing cases allow employers to let their guard down.4 They do not.
Even apart from the circuit court split on standing rules, the FCRA allows claims in federal or state court (i.e., there is concurrent jurisdiction), and state courts may not be bound by Article III even when adjudicating claims under a federal statute.5
Pre-Adverse Action Notice
As a reminder, if an employer intends to take any “adverse action” against a candidate based on information in a background report (e.g., criminal convictions), the employer must follow a two-step notice process. First, before the employer takes any adverse action (e.g., rescinds a conditional job offer), the employer must send a pre-adverse action notice, including copies of the report and the Consumer Financial Protection Bureau’s Summary of FCRA Rights,6 and provide the candidate with a meaningful opportunity to review the documents and raise concerns about any inaccurate or incomplete information.7 (Candidates also have a right to “dispute” the report directly with the consumer reporting agency under 15 U.S.C. § 1681i.) Second, if the employer decides to take the adverse action, the employer must send an “adverse action” notice.8
The plaintiff’s bar routinely asserts pre-adverse action claims as nationwide class actions seeking to recover statutory damages under 15 U.S.C. § 1681n. The plaintiff must prove the FCRA violation was “willful” (i.e., intentional or reckless) to recover statutory damages. Recent cases have refused to dismiss pre-adverse action notice claims without a jury trial if the plaintiff presented evidence of willfulness, including evidence the employer lacked policies and procedures for using background reports and failed to train employees about complying with the FCRA.9 Prudent employers will mitigate against this risk by, among other things, establishing necessary policies and procedures and providing training.
Because FCRA lawsuits against employers will not abate in 2023, employers should ensure that fortifying FCRA compliance, including conducting audits, remains on their to-do list this year. Because the so-called “ban the box” laws governing the use of criminal records layer on top of the FCRA’s requirements in some jurisdictions, employers also should ensure they remain vigilant in complying with and providing training regarding these laws.10
See Footnotes
1 When employers are screening candidates for commercial driver and some other roles, they may be subject to less stringent notice requirements. See 15 U.S.C. § 1681b(b)(3)(B).
2 See generally Rod M. Fliegel, “No Concrete Harm, No Standing”: The Supreme Court Reinforces the Requirement for Injury-in-Fact Even for Violations of Federal Statutes, Littler Insight (June 28, 2021).
3 See, e.g., William J. Simmons and Rod M. Fliegel, Eighth Circuit Holds Article III Standing Was Lacking for an Alleged Violation of the FCRA’s “Pre-Adverse Action” Notice Provision, Littler Insight (Apr. 6, 2022), and Rod M. Fliegel, The Ninth Circuit Holds Plaintiff Lacked Standing for an Alleged Violation of the FCRA's "Pre-Adverse Action" Notice Provision, Littler ASAP (July 18, 2018).
4 See, e.g., Rod M. Fliegel, Seventh Circuit Holds Class Action Plaintiff Had Standing for an Alleged Violation of the FCRA’s "Pre-Adverse Action" Notice Provision, Littler ASAP (Aug. 30, 2018).
5 15 U.S.C. § 1681p.
6 The Summary was updated and employers will want to ensure they are using the most recent version. See Phillip L. Gordon, William J. Simmons, and Rod M. Fliegel, New Amendment May Soon Affect FCRA Pre-Adverse Action Notice Requirements, Littler Insight (Aug. 30, 2018).
7 15 U.S.C. § 1681b(b)(3)(A). See also Rod M. Fliegel, Federal District Court Holds Employer to its Promise in FCRA “Pre-Adverse Action” Notice, Littler Insight (June 30, 2017).
8 15 U.S.C. § 1681m.
9 See, e.g., Khanh Pham v. Aeva Specialty Pharm., Case No. 21-cv-00703-NYW-STV, 2022 U.S. Dist. LEXIS 221626 (D. Colorado Dec. 8, 2022) (denying summary judgment).
10 See, e.g., Claire Pariano and Paula Anthony, Implementation of Connecticut’s Clean Slate Law Set to Begin January 1, 2023, Littler ASAP (Dec. 30, 2022); Rachel P. Kaercher, Wendy Buckingham, and William Simmons, Atlanta Amends Anti-Discrimination Ordinance to Include Protections for Gender Expression and Criminal Histories, Littler ASAP (Nov. 10, 2022).
