Employment Law Daily FCRA class action revived because lost opportunity to respond to background check was concrete injury
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Wednesday, September 5, 2018

FCRA class action revived because lost opportunity to respond to background check was concrete injury

By Brandi O. Brown, J.D.

A job applicant whose employment offer was rescinded after a background check and whose class action lawsuit against the employer was dismissed based on a district court’s finding that she lacked Article III standing, had part of her suit reinstated by the Seventh Circuit on appeal. The employer’s action in rescinding the job offer without first providing the applicant a copy of the report denied her the chance to review it and present her side of the story, the court explained, which was the “very reason” the FCRA obligated employers to produce such reports before taking adverse action. However, the appeals court agreed that the employee did not have standing to bring a notice claim (Robertson v. Allied Solutions, LLC, August 29, 2018, Wood, D.).

Job offer rescinded after check. In the lawsuit giving rise to this appeal, the named plaintiff alleged that she applied for a position with Allied, was offered the job, a background check was run, and before she reported for work the job offer was rescinded. Although she received forms prior to the check being done, she alleged that the forms she received at that time included extraneous information and were not “clear and conspicuous” as required by the Fair Credit Reporting Act. In her background check “non-conviction information” was revealed in her criminal history. The employer revoked its job offer, informing her it was because of information in the criminal background check. She received from the employer neither a copy of the report nor a written description of her FCRA rights, as was required by that law.

Court raises standing concerns. She filed a class action lawsuit, alleging two claims: (1) a notice claim based on the employer’s failure to provide clear and conspicuous disclosure forms, and (2) an adverse-action claim based on the employer’s action in rescinding the job offer without first supplying her a copy of the report or a written summary of her rights. Each claim was brought on behalf of a distinct subclass. After mediation the parties reached a tentative settlement agreement. Before the applicant presented her unopposed motion under FRCP 23(e), however, the United States Supreme Court decided Spokeo, Inc. v. Robins, a decision that related to federal jurisdiction under the Act. Rather than acting on the motion after it was filed, the district court asked the parties to brief the question of whether the employee had Article III standing, citing Spokeo.

Case dismissed, appealed. Thereafter, the court delayed ruling while the Seventh Circuit considered a notice claim in Groshek v. Time Warner Cable, Inc., which involved “an injury functionally indistinguishable from” those supporting the applicant’s notice claim. In that case the appeals court determined that standing had not been conferred. Relying on those decisions, the district court dismissed the applicant’s entire case. It concluded that she lacked standing with regards to the adverse-action claim because she failed to plead facts that connected the lost job offer with the employer’s failure to turn over a copy of the background report. The applicant appealed.

Informational injury existed. “An Article III injury may exist solely because a defendant infringes a congressionally created right,” the court explained, and while not all statutory violations inflict concrete personal harm, withholding information the publication of which is statutorily required may create an “informational injury” that does. That injury becomes concrete if it impairs the ability of the plaintiff to use the information as intended.

In this case, the Act’s substantive purpose was for job applicants like the plaintiff to be able to review the information generated in the background check and present their side of the story. That disclosure is compelled by the statutory language to occur prior to the adverse action taken by employers and, unlike other provisions applicable to particular classes of employers, subsection 1681b(b)(3)(A) provides a broad opportunity to respond. It does not limit the range of disputes to only those involving concerns about accuracy or completeness. In other words, “[t]he employee has the right to present her side of the story ‘even where the facts are clear’” and provide context. That context, the court explained, “may be more valuable than contesting accuracy.”

Supported standing. It did not matter that the applicant did not plead what she might have said if she had been given the chance. It also was immaterial that she might not have been able to convince the employer to honor its offer. “An information injury” the court explained “can be concrete when the plaintiff is entitled to receive and review substantive information.” Moreover, Spokeo did not dictate a contrary result. Not only did the U.S. Supreme Court in that case, which involved inaccurate information, never decide whether a concrete injury had been alleged, but that case was also considering a different point in the process, i.e., the relationship between the reporting agency and the employer and not the relationship between the employer and the job applicant. Thus, different statutory duties applied. In this case, the appeals court concluded, the job applicant alleged enough to demonstrate Article III standing.

Notice claim not revived. However, the district court’s dismissal of the notice claim was proper. Authority to adjudicate a claim must exist for a court to resolve a case, the appeals court explained, even if that resolution involves nothing more than conducting a fairness hearing to approve a settlement. The applicant’s arguments that there were exceptions that should have been made were unpersuasive. The lower court was “duty-bound to look into its jurisdiction the minute the question arose.” The appeals court also found no abuse of discretion in the district court’s decision denying the applicant permission to amend her complaint.

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