Thursday, June 7, 2007

Supreme Court adopts recklessness standard for willful Fair Credit Reporting Act claims

In the employment context, the federal Fair Credit Report Act ("FCRA") requires specific notice and consent before an employer can conduct a background check on an applicant or employee, and pre-adverse action and adverse action notices before a company can take an adverse action (refusal to hire, termination, demotion, etc.) against an applicant or employee. If this language is foreign to you, you should contact your employment counsel to ensure that your application process complies with this law. Compliance is important, because there are damages and penalties, including attorneys' fees and costs, available for an aggrieved individual. For a negligent violation, a plaintiff is entitled to additionally recoup actual damages only. For a willful violation, the panoply of available damages expands to include statutory penalties and punitive damages.

In a potentially employee-friendly ruling, the Supreme Court has ruled that a willful violations of the FCRA do not merely cover intentional and knowing violations, but also reckless violations. The Court distinguished between civil law, where "willfulness" nearly always includes a component of recklessness, and criminal law, where it requires purpose and intent. The Court then adopted the common law definition of recklessness - an objectively assessed high risk of harm. By blurring the distinction between negligence and willfulness by injecting an aspect of reasonableness into the damages calculus, the Court has made it potentially more difficult for employer to avoid the higher damages that go along with a finding of willfulness.

For a copy of the Court's decision, see Safeco Insurance Co. of America v. Burr.

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