Tuesday, November 3, 2015

An injury without an injury? #SCOTUS, standing, and the Fair Credit Reporting Act.

Yesterday, the Supreme Court heard oral argument in Spokeo, Inc. v. Robins. This case should answer a very important question for employers: Does a plaintiff have standing to bring a lawsuit for a technical violation of the Fair Credit Reporting Act if the individual suffered no resulting concrete harm? The implications of this case are huge.

Over the past few years, the number of FCRA class-action lawsuit has increased exponentially. It’s easy to see why. The FCRA is a highly technical statute. It does not regulate how employers use background checks on applicants or employees, but instead regulates the hoops through which an employer must jump to use legally obtain these background checks. These hoops are:

  1. Notice to the applicant or employee of the intent to obtain the background check.
  2. Consent by the applicant or employee.
  3. Certification to the consumer reporting agency of the notice and consent.
  4. Pre-adverse action disclosure to the applicant or employee before taking an action based on the content of the report obtained.
  5. Wait a reasonable amount of time.
  6. Adverse-action disclosure.

If an employer slips on any step, it has violated the statute. Yet, missing one of these technical steps usually does not make an applicant any more hireable. Just because an employer buries the notice and consent in an employment application (illegal / violates the FCRA) does not mean that an applicant with a felonious criminal history should be hired.

This is where Spokeo enters the picture. The case will decide whether a plaintiff can suffer a violation of a statutory right without corresponding actual damages. If SCOTUS answers “yes”, it will mean that job applicants and employees will have a green light to file lawsuits even if they can’t show that the violation of the law cost them money. Cynically, a “yes” would give litigants carte blanche to turn innocuous and harmless conduct into expensive class action lawsuits.

Keep an eye out for the decision in this case in 2016. It will help define the degree of concern employers will need to show towards FCRA class actions moving forward.

For now, you can read the oral argument transcript [pdf] to see how divided across ideological issues the justices appear to be over this issue.