By Pamela Q. Devata, Esther Slater McDonald, John Drury, and Connor M. Bateman

Seyfarth Synopsis: As part of an evolving trend of narrowly interpreting the FCRA’s “standalone” disclosure and “clear and conspicuous” disclosure requirements, the Ninth Circuit has held that users of consumer reports may violate the FCRA and ICRAA by including “extraneous” state law notices and potentially “confusing” language in background disclosure forms.

Both the Fair Credit Reporting Act (FCRA) and California’s Investigative Consumer Reporting Agencies Act (ICRAA) regulate background screening and the process employers must follow when procuring background reports on applicants. Under both statutes, before procuring a consumer report (i.e., a criminal or other background report) on an applicant, employers and other users of consumer reports must provide the applicant a “clear and conspicuous disclosure” that “a consumer report may be obtained for employment purposes” and further require that the disclosure must be “in a document that consists solely of the disclosure.”

Yesterday, the Ninth Circuit Court of Appeals held that this statutory language, whether derived from the FCRA or ICRAA, prohibits employers from including any superfluous information in the disclosure document. Thus, at least within the Ninth Circuit, employers cannot include disclosures required by other state laws in the same document that contains the disclosure required by the FCRA. The court also indicated that any language in the disclosure document that could confuse a reasonable person about his or her rights under the FCRA or ICRAA likely will violate the laws’ “clear and conspicuous” requirement.

Discussion of the Facts & Opinion

The case, Gilberg v. California Check Cashing Stores LLC, involves a putative class action filed by Desiree Gilberg, a former employee of CheckSmart Financial, LLC. Before starting work, Gilberg signed a form entitled “Disclosure Regarding Background Investigation,” which stated that CheckSmart may obtain the applicant’s background report, and that the applicant had the right to request a copy of his or her report. The form also included information regarding the applicant’s right to obtain a copy of the report under various state laws. Gilberg alleged that this disclosure violated the FCRA and ICRAA. The Ninth Circuit agreed and reversed the district court’s grant of summary judgment to CheckSmart.

First, the court held that by including other state-mandated disclosure information, CheckSmart’s disclosure form violated the FCRA’s standalone document requirement. Citing its earlier decision in Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017), the court reiterated that “the statute [means] what it [says]: the required disclosure must be in a document that consists ‘solely’ of the disclosure.” Id. at 496 (internal alterations omitted). Although Syed involved an employer who included a liability waiver in the same document as the disclosure, the court held that the FCRA’s use of the word “solely” prohibits “any surplusage” in the disclosure document, including any state-mandated disclosure information. The court rejected CheckSmart’s argument that the inclusion of such additional information furthers the FCRA’s disclosure purposes, noting that CheckSmart’s form included information on state laws that were inapplicable to Gilberg and referenced documents that were not part of the FCRA-mandated disclosure. The court held that such “extraneous information is as likely to confuse as it is inform . . . [and] does not further FCRA’s purpose.” In any event, the court held that the statute’s purported purpose could not overcome its plain language.

Second, the court held that the disclosure, though “conspicuous,” was not “clear.” Analyzing the clarity requirement, the court explained that a reasonable person would not understand the following language in the disclosure:

The scope of this notice and authorization is all-encompassing; however, allowing CheckSmart Financial, LLC to obtain from any outside organization all manner of consumer reports and investigative consumer reports now and, if you are hired, throughout the course of your employment to the extent permitted by law.

The court took particular issue with the use of the term “all-encompassing,” noting that CheckSmart failed to explain the meaning of that language or how it could impact an applicant’s rights. The court further noted that the second half of the sentence, after the semicolon, lacked a subject and was incomplete. Although it appears that CheckSmart intended to use a comma instead of a semicolon, the court held that the sentence, as drafted, “suggests that there may be some limits on the all-encompassing nature of the authorization, but it does not identify what those limits might be.”

The court further noted that the following language would likely confuse a reasonable reader:

New York and Maine applicants or employees only: You have the right to inspect and receive a copy of any investigative consumer report requested by CheckSmart Financial, LLC by contacting the consumer reporting agency identified above directly.

In the court’s view, this language could be construed to mean that only New York and Maine applicants have the right to inspect and receive a copy of the report rather than to mean that only New York and Maine require consumers to be notified of their rights at this stage of the application process.

The court’s reasoning appears inconsistent with the statutory text. The FCRA and ICRAA require that the disclosure that a background check will be obtained to be “clear and conspicuous,” and the first two sentences of the CheckSmart disclosure plainly disclose that a report may be obtained for employment purposes:

CheckSmart Financial, LLC may obtain information about you from a consumer reporting agency for employment purposes. Thus, you may be the subject of a ‘consumer report’ and/or an ‘investigative consumer report’ ….

Rather than considering the disclosure form as a whole, the court focused on discrete sentences without considering them in the context of the entire form. The court also did not explain how a state-law notice that a consumer has a right to obtain a copy of the report made it unclear that a report would be obtained.

Interestingly, it appears that neither the Court nor the parties addressed whether the plaintiff even had standing to sue. Unlike in Syed, Gilberg did not allege that the disclosure confused her or that she did not understand that she would be subject to a background report. Thus, the more appropriate route for the Ninth Circuit would have been to dismiss the claim under Syed, which held that a consumer has standing to sue if she was confused or did not understand that she was authorizing a background check. Instead, the court took the opportunity to hold that the disclosure form could have confused a consumer even though no one, not even the plaintiff, had made such an allegation.

Employer Outlook

This case serves as yet another reminder to employers to carefully review their background check disclosure and authorization forms and processes. Both the FCRA- and ICRAA-mandated disclosures should be set out in separate, standalone documents, entirely distinct from any other application paperwork, including even applicable disclosures mandated by other state laws. Further, although courts apply a “reasonable person” standard to assess a disclosure’s clarity, Gilberg may portend a movement toward an even more exacting standard. In light of this evolving trend, employers should make sure to use language that is impeccably clear, concise, and free from any typographical errors or wording that could confuse the least sophisticated consumer about his or her rights under the FCRA or any comparable state laws.

Pamela Q. Devata is a partner in Seyfarth’s Chicago office, John Drury is Senior Counsel in the firm’s Chicago office, Esther Slater McDonald is a partner in the Firm’s Atlanta office, and Connor M. Bateman is an Associate in the firm’s Atlanta office. If you would like further information about Fair Credit Reporting Act disclosure and authorization forms or best practices for compliance with the FCRA, please contact your Seyfarth attorney, or Pamela Devata at pdevata@seyfarth.com, Esther McDonald at emcdonald@seyfarth.com, John Drury at jdrury@seyfarth.com, or Connor Bateman at cbateman@seyfarth.com.

By Pamela Q. Devata and Jennifer L. Mora

Seyfarth Synopsis: In the last three years, employers have seen a sharp increase in the number of employment class actions under the Fair Credit Reporting Act (FCRA). Most of the reported cases involve challenges to the employer’s procedures before ordering a background report. More recently, however, we are seeing more cases against employers alleging a failure to follow the FCRA’s adverse action requirements, which must be followed any time an employer intends to take “adverse action” (revoking a job offer or terminating employment) against a job applicant or a current employee based, in whole or in part, on information contained in their background report.

A recent federal court decision demonstrates the importance of employers following these highly technical requirements when using background reports for hiring and other employment decisions. In Wright v. Lincoln Prop. Co., a judge in the Eastern District of Pennsylvania considered how an employer can comply with the adverse action process if it relies on an initial background report before revoking a job offer, but then receives a subsequent, corrected report. In Wright, the plaintiff received an employment offer that was contingent upon successful completion of a background check. The first background report, dated June 6, was a partial, in-progress report that revealed a misdemeanor conviction for driving under the influence and two separate drug-related felony convictions. A week later, on June 13, a more comprehensive, final report was provided to the employer, but it included the same substantive criminal information. The employer sent the partial June 6 report to the plaintiff but did not send the final, completed June 13 report.

Both parties moved for summary judgment. In alleging the employer violated the FCRA, the plaintiff raised two arguments. First, he argued he never “received” a copy of the June 6 report. The court summarily rejected this argument, concluding the FCRA does not explicitly require an employer “to ensure that the consumer to whom the report relates actually received the notice.” Instead, the FCRA merely requires the employer to “provide” a copy of the report. Thus, the court concluded that a jury had to decide whether the employer satisfied its obligations under the FCRA based on its evidence that it did, in fact, “provide” him with a copy of the report.

The plaintiff then argued the June 6 report did not satisfy the FCRA because it did “not contain the required information, including a summary of rights and advance notice of [the employer’s] intention to withdraw its job offer based on the report.” He also argued the employer relied on the June 13 report (which was never provided to him) and, thus, sending the June 6 report did not satisfy the FCRA. On the other hand, the employer argued in its motion that dismissal of the claim was appropriate because (a) it provided the plaintiff with a copy of the report and the FCRA summary of rights and (2) the convictions, which were listed in both reports, were not erroneous and, in fact, the plaintiff to admitted to them.

The court concluded that a jury should resolve the dispute. In so doing, the court noted that the employer revoked the offer because of the convictions listed in both reports and that while there were no material differences between the criminal history included in the two reports, the final, June 13 report “contain[ed] a more thorough summary of other types of searches run by [the background check company], such as credit report” and the plaintiff “remained unable to contest the full information upon which [the employer] relied even if he indeed received the June 6th transmittal, given that it only included his criminal history.” Because a copy of the final report was not sent to the plaintiff, the court denied the employer’s motion for summary judgment.

The court’s ruling does not equate to a blanket requirement that an employer provide all copies of background reports to rejected job applicants or terminated employees. It is possible the jury will find that, under these facts, a second pre-adverse action notice was not required. That said, employers that receive corrected or more comprehensive reports after sending the initial report should assess the new report to determine whether to send a subsequent pre-adverse action notice. As this case reflects, that both reports contained the same conviction information that caused the employer to revoke the offer did not spare the employer from the expense and burden of a jury trial.

Now more than ever, employers that conduct background checks, whether pre-hire or during employment, should consider taking steps to ensure they are complying with the FCRA’s notice requirements, including a privileged review of their background check process documents and notices and the procedures used when ordering background reports and relying on them when making employment decisions. Employers also should be mindful of other laws impacting their use of criminal history information, including the “ban-the-box” laws sweeping the nation and the Equal Employment Opportunity Commission’s interest in background screening policies that may have a disparate impact on minority workers.

Those with questions about these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the Background Screening Compliance & Litigation Team.

By Esther Slater McDonald

Seyfarth Synopsis: The New York Court of Appeals’ ruling on questions regarding the use of criminal convictions in hiring will impact employers and may impact the background screening industry, the temporary staffing industry, and other businesses requiring its affiliates or contractors to adhere to certain criminal history guidelines.

In Griffin v. Sirva, Inc., 835 F.3d 283 (2016), the United States Court of Appeals for the Second Circuit certified several questions to the New York Court of Appeals, seeking clarification on provisions of the New York States Human Rights Law relating to consideration of criminal convictions in hiring.

The Background Facts

Trathony Griffin and Michael Godwin worked for Astro Moving and Storage Company, a company providing local warehouse and transportation services in New York. Astro had an agency contract with Allied Van Lines to provide household moving services on behalf of Allied.  Pursuant to the contract, all Astro employees working on Allied jobs were required to pass criminal background checks.  Allied engaged a third party to conduct the background checks and to apply Allied’s adjudication guidelines.  Under Allied’s guidelines, a felony conviction for any sexual offense disqualified an individual from working on Allied jobs.  That disqualification applied only to Allied jobs; it did not prohibit an individual from working for Astro on non-Allied jobs.

Griffin and Godwin were employed by Astro. At some point, Astro required them to undergo background checks so that they could continue to work on Allied jobs.  The background checks revealed that both men had been convicted of felony sexual offenses and were designated as “Sexually Violent Offenders.”  According to Griffin and Godwin, Astro terminated them after receiving their background reports.

Sometime later, Griffin and Godwin sued Allied and Sirva, Inc., a holding company related to Allied, alleging that they had violated the New York State Human Rights Law by denying them employment because of their criminal convictions or, alternatively, by requiring Astro to deny them employment because of the convictions.

The New York State Human Rights Law

Section 296 of the New York State Human Rights Law.  Section 296(15) generally makes it unlawful for “any person, agency, bureau, corporation, or association … to deny … employment to any individual” because of a criminal conviction unless there is a direct relationship between the criminal offense and the employment at issue or the employment would involve an unreasonable risk to property or to the safety or welfare of individuals or the general public.  Section 296(6) also makes it unlawful for “any person to aid, abet, incite, compel or coerce” a violation of Section 296(15).

The Litigation

The district court entered judgment for Allied and Sirva.  The district court held that only employers can be liable for denying employment and that, to be liable for aiding and abetting a denial of employment, a business must be a joint employer of the individual denied employment.   The court determined that Allied and Sirva were not “employers” or “joint employers” of Griffin or Godwin.

On appeal, the Second Circuit cast doubt on the district court’s ruling and concluded that the New York State Human Rights Law may apply to Allied and Sirva even though they did not employ Griffin and Godwin. The Second Circuit stated that Section 296(15) applied to “any person, … corporation, or association,” and thus the Section may apply to companies other than employers.  Even if Section 296(15) is limited to “employers,” the Second Circuit concluded that the term “employer” could be read to encompass entities like Allied and Sirva.  Last, the Second Circuit stated that the standard for aiding and abetting liability was unclear and indicated that New York may have intended for the provision to have a broad reach that encompasses non-employers, including contracting parties, regardless of their intent.

Because New York courts have not determined who may be liable under Section 296(15) or addressed the scope of Section 296(6) liability for businesses, the Second Circuit certified the following issues to the New York Court of Appeals for it to decide:

(1) Does Section 296(15) of the New York State Human Rights Law, prohibiting discrimination in employment on the basis of a criminal conviction, limit liability to an aggrieved party’s “employer”?

(2) If Section 295(15) is limited to an aggrieved party’s “employer,” what is the scope of the term “employer” for these purposes, i.e. does it include an employer who is not the aggrieved party’s “direct employer,” but who, through an agency relationship or other means, exercises a significant level of control over the discrimination policies and practices of the aggrieved party’s “direct employer”?

(3) Does Section 296(6) of the New York State Human Rights Law, providing for aiding and abetting liability, apply to § 296(15) such that an out-of-state principal corporation that requires its New York State agent to discriminate in employment on the basis of a criminal conviction may be held liable for the employer’s violation of § 296(15)?

The New York Court of Appeals accepted the certification, and oral argument in the case is expected to occur later this year.

The Takeaway

Employers, staffing agencies, background screeners, and others should be watching Griffin v. Sirva, Inc. How the New York Court of Appeals will rule on the certified questions is uncertain.  The court could interpret Section 296 narrowly to apply only to employers, or the court could interpret the section broadly in a manner that expands liability to non-employers.  Regardless of the outcome, any ruling is likely to provide guidance to employers and others, which will enable businesses to better manage risk.

For more information on this or any related topic please contact the author, your Seyfarth attorney, or any member of the Background Screening Compliance & Litigation Team.

By Pamela Q. Devata and Craig B. Simonsen

Seyfarth Synopsis: The FTC has adjusted its per violation penalties, in some cases by substantial amounts.

In a federal rulemaking published last week, the Federal Trade Commission (FTC) has finalized amendments to Commission Rule 1.98 to adjust the maximum civil penalty dollar amounts for violations of sixteen provisions of law. 81 Fed. Reg. 42476 (June 30, 2016).

The U.S. Congress had mandated the formula for calculating the increases under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which included a catch-up provision for inflation. See related Implementation of the Federal Civil Penalties Inflation Adjustment Act, OMB Memorandum M-16-06 (February 24, 2016).

Based on the FTC’s interim final rule recalculation, violations of final Commission orders issued under section 5(b) of the FTC Act, and violations of certain trade regulation rules and other laws enforced by the FTC with civil penalty provisions, will increase significantly from $16,000 to $40,000.

In addition, specifically under the Fair Credit Reporting Act Section 621(a)(2) (duty to correct and update information) for knowing violations of the Act, the per violation penalty will increase from $3,500 to $3,756.

The adjusted violation amounts will take effect on August 1, 2016.

It is interesting that the FTC suggests that the best way to avoid any penalties is to “comply with the law”.  That sounds simple, when writing it in a blog, but real life may be more complicated. Employers and credit reporting agencies conducting background checks should be sure to evaluate their policies and processes in light of these new penalty provisions, and should also train their Human Resources professionals on these laws — to help “comply with the law”.

For more information on employer responsibilities under the FCRA or on the use of criminal background screening in employment, please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Background Screening Compliance & Litigation Team.

By Pamela Q. Devata and Craig B. Simonsen

The Federal Trade Commission (FTC) has just released a report on Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues (Report), January 6, 2016.

The FTC Chairwoman Edith Ramirez indicates in the FTC news release on the Report, that “big data’s role is growing in nearly every area of business, affecting millions of consumers in concrete ways….  The potential benefits to consumers are significant, but businesses must ensure that their big data use does not lead to harmful exclusion or discrimination.”

The Report examines “possible risks” that could result from biases or inaccuracies about certain groups, including:

  • Individuals mistakenly denied opportunities based on the actions of others;
  • Exposing sensitive information;
  • Creating or reinforcing existing disparities
  • Assisting in the targeting of vulnerable consumers for fraud;
  • Creating higher prices for goods and services in lower-income communities; and
  • Weakening the effectiveness of consumer choice.

The Report reviews various laws that may apply to the use of big data, concerning possible issues of discrimination or exclusion, including the Fair Credit Reporting Act, Federal Trade Commission Act, and other equal opportunity laws. Perhaps helpfully, from the Agency’s perspective, the Report also provides a “range of questions for businesses to consider” when they examine whether their big data programs comply with these laws.

The Report also suggests four key “policy questions” that the Agency claims are drawn from research, into the ways big data can both present and prevent harms. The policy questions posed by the FTC “are designed to help companies determine how best to maximize the benefit of their use of big data while limiting possible harms….” Companies are intended to consider, and perhaps answer the questions of accuracy and built-in bias that may exist, and whether the company’s use of big data raises “ethical or fairness concerns.”

The Commission voted (4-0) to issue the Report. The Report was issued along with Commissioner Maureen Ohlhausen’s separate statement.

For employers, especially now with this heightened scrutiny and attention from the FTC, it may be a good time for you to consider seriously the “range of questions” as to whether your company’s big data programs comply with these laws.

Those with questions about these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the Global Privacy & Security Team.

 

 

 

 

In the second periodic installment of the Employment Law Lookout Blog Team’s analysis of employment law (and related) case being heard by the United States Supreme Court this term, read on for our take on Spokeo Inv. v. Robins.

Plaintiffs Without Injuries?  SCOTUS To Hear Arguments Whether
Plaintiffs Need to Show Concrete Harm To Establish
Injury-in-Fact for Article III Standing

By Pamela Q. Devata and Robert T. Szyba

On April 27, 2015, the U.S. Supreme Court granted cert in Spokeo, Inc. v. Robins, a case brought under the Fair Credit Reporting Act (“FCRA”) where the Ninth Circuit held that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

The plaintiff, Thomas Robins, filed a putative class action against Spokeo, Inc., which is an online people search platform that organizes information about people into comprehensive profiles. Robins sued the company for allegedly violating the FCRA by presenting inaccurate information about him on the Internet—he accused the company of over-reporting his earnings and education level, and reporting that he was married with children, even though he was not married and had no children.  He argued this information might have a negative impact on his employment prospects, but did not allege any actual harm.  With no actual damages, Robins sued to recover only statutory damages.  In the Ninth Circuit’s view, that was enough for to confer standing under Article III.

The question that the Supreme Court took up: Does a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation, have standing under Article III to bring a claim on behalf of himself or a class of individuals?

Leading Up To Spokeo.  This case follows in the footsteps of the Supreme Court’s 2013 decision in Clapper v. Amnesty Int’l USA, where a group of attorneys and human rights, labor, legal, and media organizations sued seeking a permanent injunction to stop surveillance permitted by the FISA Amendments Act of 2008.  In the 5-4 decision, Justice Alito wrote that under Article III, threatened injury must be at least “certainly impending.”  Possible future injuries were not enough.  But Clapper left the question of actual harm open… until now.

The Circuits.  The Circuits are split.  For example, the Ninth Circuit, in Spokeo, found actual harm was not needed if a plaintiff could point to a violation of a statutory right.  This comported with the Sixth Circuit’s view (Beaudry v. TeleCheck Services, Inc.), and the Fifth and Seventh have also shown their support (Mabary v. Home Town Bank and Remijas v. Neiman Marcus Group, LLC, respectively).  The Second, Third, and Fourth Circuits have generally disagreed: Kendall v. Employees Retirement Plan of Avon Prods. (2d Cir.); Doe v. National Board of Medical Examiners (3d Cir.); David v. Alphin (4th Cir.).

Why This Case Matters.  The Supreme Court’s decision may have a significant impact on congressional power as well as the future of consumer, workplace, and other class actions.  The question formally presented is rooted in separation of powers issues between Congress and the federal judiciary, in that it may limit Congress’ ability to create a statutory right of action without a requirement of actual harm in order to recover.  However, the Court may opt to narrow the question to:  Can plaintiffs sue for the violation of a statute when they can show no actual injury or harm that they have suffered?

The Court’s answer in the negative could discourage the current wave of consumer, workplace, and other class actions seeking millions in statutory damages. On the other hand, a decision allowing individual and class claims to go forward alleging only statutory damages without injury in fact would likely have the opposite outcome, resulting in claims based on alleged violations of statutory requirements, brought by individuals who suffered no adverse consequence of the identified possible violation.

Stay Tuned… Oral argument is set for Monday, November 2, 2015 — a follow up blog post will follow here when we have a decision.

If you would like more information regarding this article, please contact the author or your Seyfarth attorney.

By Pamela Q. Devata, Robert T. Szyba, and Ephraim J. Pierre

SCOTUSFollowing the U.S. Supreme Court’s grant of certiorari on April 27, 2015 in Spokeo, Inc. v. Robins, No. 13-1339 (which we reported here), the Petitioner has weighed in with their brief.

As you may recall, the question before the Court has the potential to determine the future scope of congressional power, as well as consumer and workplace-related class actions: Does a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation, have standing to bring a claim on behalf of himself or a class of individuals?

Recall that the Plaintiff, Thomas Robins, brought a purported class action against Spokeo, Inc., accusing the company of violating the Fair Credit Reporting Act (“FCRA”) by presenting inaccurate information about him on the Internet. The Plaintiff sued because the company over-reported his earnings and education level, and reported that he was married with children, even though he was not married and had no children, alleging this information might have a negative impact on his employment prospects. However, the Plaintiff did not allege any actual injury or harm, and thus no actual damages, instead seeking statutory damages.

The U.S. Court of Appeals for the Ninth Circuit reversed the district court’s dismissal, and held that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.” 742 F.3d 409, 413. After briefing by the parties and various amici curiae, the Supreme Court sought the Solicitor General’s input, who opined that review by the Court was not warranted. The Court disagreed, and granted certiorari anyway.

Petitioner’s Argument

On July 2, 2015, the company filed its Brief for Petitioner, arguing the merits of the appeal now before the Court. The company first argued that Congress may not override requirement of an actual injury under Article III of the Constitution and established Supreme Court precedent. For instance, the brief pointed out that Warth v. Seldin, 422 U.S. 490 (1975), which the Ninth Circuit relied on below, dealt with Congress’s ability to legislate in light of principles of prudential standing, not Article III standing. Prudential standing, which is comprised of judicially-created principles, places limitations such as prohibiting a party’s ability to sue on behalf of a third party, prohibiting generalized grievances (e.g., there is no “taxpayer standing”), and limiting standing to those who are within the zone of protectable interests. The Petitioner explained that even if Congress can override these principles, it cannot override the Constitution.

This understanding comports with the past several hundred years of legal history, as the Petitioner looked back to medieval England and the evolution of the common law’s causes of action, all of which required an actual harm or injury to redress. With that backdrop, the Petitioner explained, the Framers designed Article III to permit the federal judiciary to hear “Cases” and “Controversies,” thereby limiting the courts’ authority to hear cases lacking a concrete harm, consistent with centuries of the English legal tradition upon which the limitation was based, and dovetailed with the powers of the other branches of the U.S. government. Even with these historical roots, the Petitioner pointed out that the standing requirement is a critical limitation on the modern class action device, which is commonly employed to bring cases seeking “hundreds of millions or billions of dollars” (indeed, Robins is brought on behalf of “millions” of putative class members, for up to $1,000 each — or, “billions” of dollars).

The Petitioner went on to argue that the technical violation of a statute is not the same as an actual harm to a plaintiff, and therefore cannot meet the Article III requirement. Otherwise, the body of law on Constitutional standing would be replaced by the simple inquiry into whether a statute was violated, with a corresponding fine that the private plaintiff could recover. Indeed, even compared to copyright law, where a statutory violation is actionable, the underlying injury is based in a plaintiff’s property right, well-established in the common law. Similarly, the law of defamation recognizes actual harm as a pre-requisite to suit, even if it is difficult to assess the extent of actual damages.

Last, the Petitioner argued that even if a mere statutory violation satisfies the injury-in-fact requirement, the Supreme Court should hold that the FCRA does not recognize a cause of action for plaintiffs who are unable to demonstrate concrete harm because Congress did not specifically express its intent to do so.

Supreme Court’s Decision May Have Wide-Ranging Effects

The Supreme Court’s decision in Spokeo is likely to dramatically affect employers, consumer reporting agencies, and other corporate defendants as well as class actions brought under various federal statutes, such as the FCRA, and potentially the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, and the Employee Retirement Income Security Act, as well as data breach claims. Notably, the Supreme Court first appeared ready to decide this issue several years ago in First American Financial Corp. v. Edwards, No. 10-708 (2010). Nevertheless, after briefing and oral argument, the Supreme Court dismissed action as “improvidently granted.” It appears that the Supreme Court may be ready to tackle the question in Spokeo, as indicated by its rejection of the Solicitor General’s recommendation to deny certiorari or simply avoid the broader question of Congressional power.

Now that the issue is before the Court, a broad Article III ruling could have a significant impact if it addresses whether Article III limits Congressional power to create statutory rights enforceable through a private right of action, without the plaintiff having to first personally suffer a concrete harm. If this Congressional power were limited, the number of viable class actions under the FCRA and other federal statutes (often those seeking millions or billions in damages) may be similarly and substantially limited.

Of course, the Supreme Court may also affirm the Ninth Circuit under a broad Article III ruling, and establish that Congress may create a private right of action based on a mere statutory violation and not a concrete, actual injury. A decision allowing individual and class claims to go forward alleging only statutory damages would embolden potential plaintiffs and encourage more complex class actions. Indeed, private plaintiffs and their counsel would have the ability to find, and potentially recover for, a number of legal violations they might find regardless of whether any actual harm occurred.

Presently, the Respondent is scheduled to file his brief on August 24. As Spokeo unfolds, employers should continue to closely monitor the developments in the case in light of the potential impact on prospective and current workplace and consumer litigation across a variety of federal statutes.

If you have any questions regarding this article, please contact any of the authors, or your Seyfarth attorney.

By Pamela Q. Devata, Gerald L. Maatman, Jr., and Robert T. Szyba

blogYesterday the U.S. Supreme Court granted the petition for writ of certiorari filed in Spokeo, Inc. v. Robins, No. 13-1339 (U.S. Apr. 27, 2015).

As we previously reported, the Spokeo petition poses a question with a significant impact on the future scope of consumer and workplace-related class actions: whether Congress can confer standing on a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation?

 

Supreme Court Grants Review Despite Government’s Opposition

The Supreme Court rejected the Solicitor General’s recommendation to deny certiorari or simply avoid the broader question of Congressional power and instead focus on the specifically alleged injury in Spokeo (the public dissemination of inaccurate personal information) and the specific statute at issue (the Fair Credit Reporting Act or “FCRA”), and granted certiorari regarding the broader question of congressional power.

Implications For Employers

The Supreme Court’s ultimate decision in this case is likely to have a significant impact on congressional power as well as the future of consumer, workplace, and other class actions.  Although rooted in the complex arena of separation of powers between the Congress and the federal judiciary under Article III of the Constitution, the Supreme Court’s future decision is likely to have a practical impact on the viability of claims under a variety of federal statutes, including the FCRA.  Ultimately, the Supreme Court’s determination is likely to answer a simpler question than the one presented:  Can plaintiffs sue for the violation of a statute when they can show no actual injury or harm that they have suffered?

The Supreme Court may limit Congress’ power to create private causes of action based solely on statutory violations, and require plaintiffs to plead and establish actual injury — not just a violation of the underlying statute.  Congressional power and the number of viable class actions under the FCRA and other federal statutes may be limited.  This decision would likely discourage the current wave of consumer, workplace, and other class actions seeking millions in statutory damages.  On the other hand, a decision allowing individual and class claims to go forward alleging only statutory damages without injury in fact would likely have the opposite outcome, resulting in claims based on alleged violations of statutory requirements, brought by individuals who suffered no adverse consequence of the identified possible violation.

Stay tuned as we monitor the developments in this case.

By Pamela Quigley Devata, Paul Kehoe, and Craig B. Simonsen

The Federal Trade Commission (FTC) and the Equal Employment Opportunity Commission (EEOC) have just announced two short guides on employment background checks: Background Checks: What Employers Need to Know and Background Checks: What Job Applicants and Employees Should Know.  The documents were not subject to Commissioner review and approval prior to publication.

Jessica Rich, the Director of the FTC’s Bureau of Consumer Protection, indicated that the “FTC is pleased to work with the EEOC to help ensure that employers and potential employees have a solid understanding of their rights and responsibilities.”

Overall, the FTC and the EEOC want employers to know a couple of things.  First, that they need written permission from job applicants before getting background reports about them from a company in the business of compiling background information. Second, that it’s illegal to discriminate based on a person’s race, national origin, sex, religion, disability, or age (40 or older) when requesting or using background information for employment.

The guides provide high-level, bullet point summaries of various laws, including Title VII of the Civil Rights Act of 1964 and the Fair Credit Reporting Act (FCRA), to alert employers of their duties and employees of their rights regarding criminal background checks.  Unfortunately, the guides’ vagueness provides very little practical help to employers attempting to comply with the law and almost no advice to employees or applicants beyond the recommendations to contact the EEOC or FTC with any possible complaints.  For example, both guides state that everyone must be treated the same.  Yet, the next bullet point essentially directs employers to treat everyone differently (on a case-by-case basis), as suggested in the EEOC’s Enforcement Guidance on the Consideration of Arrest and Conviction Records issued in 2012.  While there are obvious differences between the disparate treatment and disparate impact theories of discrimination, many people without an employment law background could be further confused by the guides.

Both guides also present a limited view of what could be job-related and consistent with business necessity, i.e., a criminal background check that “accurately predict[s] who will be a responsible, reliable, or safe employee.”

Finally, statements in both guides make it appear as if the EEOC is modifying its position on conduct-related disqualifications for individuals with disabilities by suggesting that employers “[b]e prepared to make exceptions for problems revealed during a background check that were caused by a disability.”  That position seems to overstate the EEOC’s position related to conduct-related issues set forth in its Reasonable Accommodation and Undue Hardship Under the Americans with Disabilities Act Enforcement Guidance issued in 2002.

Employers may wish to look closely at these two new publications, with the understanding that the documents, in and of themselves, provide little guidance on how an employer may comply with Title VII when considering criminal backgrounds.  The guide for employers does provide a good review of an employer’s obligations under the FCRA and a snapshot of additional obligations under the ADA, the Genetic Information Nondiscrimination Act of 2008 (GINA), and Title VII’s recordkeeping requirements.  However, it is important for employers to recognize that each of these areas of the law are nuanced and not conducive to a mere bullet point analysis.

At the very least, the publications illustrate that two federal government agencies are working together on the issue of employment background checks and that current employees and future applicants may have more questions about their legal “rights.”  Employers conducting background checks should be sure to evaluate their policies and processes in light of these publications and also train their Human Resources professionals on these laws.

For more information on employers responsibilities under the FCRA or use of criminal background screening in employment, please contact your favorite Seyfarth attorney.

 

 

 By Pamela Devata and Paul Kehoe

On January 13, 2014, the Southern District of California granted the United States’ motion to intervene in Dowell v. General Information Services, Inc. (“GIS”), No. 13-2581, to defend the constitutionality of 15 U.S.C. § 1681c, a provision of the Fair Credit Reporting Act. GIS contends that subsections (a)(2) and (a)(5) of the provision, which generally prohibit consumer reporting agencies (“CRAs”) from disclosing public information regarding an individual’s non-conviction criminal history more than seven years old, is unconstitutional under Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (2011).

The case stems from a purported class action complaint filed by three plaintiffs, alleging that GIS provided non-conviction data over seven years old in a report to a private company that regulates access and provides employee registration for military base personnel. For one plaintiff, who applied at a California military base in 2012, the report disclosed three drug counts pre-2003, including information that two had been dismissed. For a second plaintiff who applied for a position at a San Diego naval base, the report identified charges in three separate criminal cases, including felonies, along with dismissal information. Finally, the third plaintiff’s report revealed multiple charges for felonies and accurately disclosed that all had been dismissed. 

In Sorrell, the Court struck down a Vermont statute that prohibited pharmacies and data brokers from selling prescriber data if the data would be used for marketing purposes. The Court determined that because the statute permitted pharmacies and data brokers to sell the information to insurance companies, university researchers, journalists and others, that the statute imposed speaker- and content-based restrictions subject to heightened scrutiny, as is required under the Constitution. The state, therefore, failed to establish that the statute directly advanced a substantial government interest and that the measure was drawn to achieve that interest, and that statute was struck down as unconstitutional. 

In Dowell, GIS maintains that if the government could achieve its interests without restricting speech or restricting less speech, it must do so under Thompson v. Western Sates Med. Ctr., 535 U.S. 357, 371 (2002) (holding that if the Government can achieve its interests in a manner that does not restrict commercial speech, or that restricts less speech, the Government must do so). GIS argues in its motion to dismiss that the government’s purported interests — relevancy, privacy and accuracy —  do not support FCRA’s blanket prohibition on disclosure. According to GIS, less restrictive alternatives, including a restriction on employer use of the older, non-conviction data, would equally advance the government’s interest.    Continue Reading Is FCRA’s Prohibition on CRAs from Disclosing Truthful Public Information Constitutional? The Government to Defend Its Position