A California federal judge recently dismissed a class action lawsuit against Lyft for alleged violations of the Fair Credit Reporting Act (FCRA) in NOKCHAN, v. LYFT, INC., Case No. 15-cv-03008-JCS. The judge ruled that the plaintiffs did not have standing based on the Supreme Court’s decision in Spokeo, Inc. v. Robbins which stated that plaintiffs must show concrete injury-in-fact, rather than hypothetical injury.
Why is this important? Employers have spent enormous energy trying to comply with FCRA requirements, and in some cases have settled class action lawsuits to avoid trial for alleged violations. Spokeo provides a robust defense against class action suits in some circumstances.
In recent years, employers have been subjected to an increasing number of class action lawsuits under the standards of the Fair Credit Reporting Act (FCRA). The FCRA stipulates a strict process for informing applicants (for jobs, housing, credit and other consumer benefits or services) that they will be the subjects of consumer background reports and following up with appropriate notifications and responses. Also, adverse decisions must follow specific procedures.
The detailed prescriptions of FCRA are easy to violate without intention when the application process fails to take certain steps, or takes the steps inappropriately. This situation is ripe for aggressive pursuit of legal action against “violators,” resulting in the burst of class action lawsuits.
For example, in September 2016 Dish Network was ordered to make a $1.75 million payment to settle an FCRA class action suit. In a more bizarre case, a man named Cory Groshek used detailed knowledge of FCRA procedures to test employers’ application procedures and then sued for minor infractions, collecting over $230,000 from 20 companies who settled.
But with the Spokeo decision, the Supreme Court has provided a legal doctrine for the defense in certain kinds of cases brought under FCRA. In these cases, the defense may be able to show that the plaintiff has not suffered injuries that meet the Spokeo test derived from Article III of the Constitution:
- The plaintiff must have suffered an injury-in-fact;
- that is fairly traceable to the challenged conduct of the defendant; and
- that is likely to be redressed by a favorable judicial decision.
With this decision, the Supreme Court says that a successful FCRA class action suit must show that plaintiffs have suffered actual damages, not just a procedural mistake.
This should not cause employers to relax efforts to comply with FCRA requirements for consumer reporting. The test that stands currently, which requires the plaintiff to show actual damages, may still be met under many circumstances.
However, a conscientious employer who is attempting to comply with the law stands a better chance to defend him or herself with Spokeo in the quiver. At the very least, employers who have performed due diligence to comply should be confident that they will have a more sound defense against procedural errors.
If you have questions about your background screening program and FCRA compliance, we invite you to talk with a Proforma Screening consultant.