Appeals Court Rules Job Applicant Not Entitled to FCRA Relief in Background Check Lawsuit
Why This Story Matters:
In August 2024, a U.S. Court of Appeals ruled that a job applicant who claimed he was not fully informed about adverse (i.e. negative) information in a background check was not entitled to relief under the Fair Credit Reporting Act (FCRA) that regulates background checks in the United States. The Appeals Court cited two Supreme Court decisions in its ruling.
Appeals Court Finds No FCRA Informational Injury Standing
On August 20, 2024, the U.S. Sixth Circuit Court of Appeals ruled that a job applicant who claimed he was not fully informed about adverse (i.e. negative) information in a background check was not entitled to relief under the Fair Credit Reporting Act (FCRA) citing two U.S. Supreme Court decisions on cases in 2021 and 2016 involving alleged violations of the FCRA.
According to the ruling, the job applicant applied for work at a retail chain store and was offered a job contingent on passing a background check. The store received a consumer report indicating the job applicant failed to disclose a misdemeanor conviction while the job applicant received a version of the report that indicated he was “not competitive” for a job.
After the store revoked the job offer, the job applicant filed a lawsuit claiming the store violated the FCRA by willfully “failing to provide applicants and employees with a full copy of their consumer reports prior to taking adverse action against them,” the ruling stated. Enacted by the U.S. Congress in 1970, the FCRA protects information collected for background checks.
The appeals court ruling specifically cited the two Supreme Court decisions when holding that the job applicant was not entitled to relief because he alleged no injury other than a statutory violation of the FCRA. By making this finding, the appeals court affirmed a federal district court’s granting summary judgment for the store for lack of standing.
The appeals court stated that the applicant “failed to point to sufficient evidence of adverse effects to survive summary judgment on his informational-injury theory of standing.” Since his application was rejected because he failed to discuss his misdemeanor conviction, the appeals court said that having all of the negative information would not have helped his case.
To establish standing under Article III of the United States Constitution, litigants must allege and ultimately prove that they personally suffered: “(1) a concrete and particularized injury; (2) that is traceable to the allegedly unlawful actions of the opposing party; and (3) that is redressable by a favorable judicial decision,” according to an Overview of Standing.
Supreme Court Decision in FCRA Case in 2021
On June 25, 2021, the Supreme Court ruled in the case of TransUnion LLC v. Ramirez that a plaintiff must suffer a “concrete harm” resulting from a defendant’s statutory violation of federal law such as the FCRA to have sufficient standing to sue under Article III of the United States Constitution and that plaintiffs in a class action lawsuit must prove every member has standing.
“To have Article III standing to sue in federal court, plaintiffs must demonstrate, among other things, that they suffered a concrete harm. No concrete harm, no standing,” Justice Brett M. Kavanaugh wrote in the majority opinion in a 5 to 4 vote. He was joined by Chief Justice John G. Roberts Jr. and Justices Samuel A. Alito Jr., Neil M. Gorsuch, and Amy Coney Barrett.
In the case, a man who could not buy a car after a credit report allegedly mistakenly stated that his name was found on a U.S. Department of the Treasury list of suspected terrorists and criminals sued the credit reporting agency on behalf of a class of 8,185 individuals for not following “reasonable procedures to assure maximum possible accuracy” under the FCRA.
“The 1,853 class members whose credit reports were provided to third-party businesses suffered a concrete harm and thus have standing as to the reasonable-procedures claim. The 6,332 class members whose credit reports were not provided to third-party businesses did not suffer a concrete harm and thus do not have standing,” Justice Kavanaugh wrote in the opinion.
“The mere existence of inaccurate information, absent dissemination, traditionally has not provided the basis for a lawsuit in American courts. The plaintiffs cannot demonstrate that the misleading information in the internal credit files itself constitutes a concrete harm. The mere presence of an inaccuracy in an internal credit file… causes no concrete harm,” the opinion stated.
Supreme Court Decision in FCRA Case in 2016
On May 16, 2016, the Supreme Court ruled in the case of Spokeo, Inc. v. Robins that consumers must prove “concrete injury” in class action lawsuits for alleged “bare” violations of a federal statute such as the FCRA and a decision to reverse a dismissal of the case was incomplete because an Appeals Court “failed to consider both aspects of the Article III injury-in-fact requirement.”
The case reviewed by the Supreme Court involved a man who filed a class action lawsuit against an online “people search engine” that sold publicly available information about individuals for alleged violations of the FCRA because of the publishing of allegedly inaccurate information about the man’s age, education, marital status, and professional experience.
The opinion in a 6-2 decision delivered by Justice Alito – with Chief Justice Roberts and Justices Anthony Kennedy, Clarence Thomas, Stephen Breyer, and Elena Kagan joining – stated that “Article III standing requires a concrete injury even in the context of a statutory violation” and a bare procedural violation “cannot satisfy the injury-in-fact requirement of Article III.”
Fair Credit Reporting Act (FCRA) Requirements
The Fair Credit Reporting Act (FCRA) is a federal law that protects information collected for background checks by “Consumer Reporting Agencies,” the term used by the FCRA for background check providers. Information in a “Consumer Report” – the FCRA’s term for a background check – cannot be provided to anyone who does not have a purpose specified in the FCRA.
The FCRA requirements cover various aspects of background checks including Consumer Reports, Consumer Reporting Agencies, Employment Purposes, Certification from Users, Disclosure to Consumers, Conditions on Use for Adverse Actions, Accuracy of Reports, Reinvestigations of Disputed Information, and Civil Liability for Willful Noncompliance.
ClearStar Helps Employers Comply With FCRA Requirements
ClearStar is a leading global Human Resources technology company that specializes in background checks, drug testing, and occupational health screening. ClearStar offers FCRA-compliant workforce screening solutions to help employers make informed hiring decisions while maintaining legal compliance. ClearStar is a leader when it comes to Compliance and Security.
- Professional Background Screening Association (PBSA) accreditation to ensure screening processes are fully compliant
- ISO 27001:2013, ISO 27018:2019 & ISO 27701:2019 to ensure the confidentiality, integrity, and availability of data
- SOC 2 Type 2 Report validates compliance with strict information security policies and procedures
- Data Privacy Framework (DPF) program certification for international data transfers
- Screening Compliance Update issued every month to inform employers
- Assured Compliance® technology to help minimize risk for employers
An HRO Today Baker’s Dozen award-winning enterprise solution provider and founding member of the Professional Background Screening Association (PBSA), ClearStar has provided innovative technology solutions to businesses in the human capital management industry from its corporate offices in Alpharetta, Georgia, since 1995. To learn more, contact ClearStar.
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