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Ohio State and Federal Courts Find No Standing to Assert Technical Violations of the FCRA’s Background Check Disclosure RequirementPDF
By: Jonathan H. Krol, Esq.
Ohio courts have recently weighed in on a hotly litigated issue related to procurement of background checks on current or prospective employees: do employees have standing to sue employers where the employer fails to provide a “stand-alone” disclosure that meets the technical requirements of the Fair Credit Reporting Act (FCRA)?
The FCRA’s disclosure requirement is found at section 1681b(b)(2)(A), which states:
Except as provided in subparagraph (B), a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless—
(i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and
(ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person.
The FCRA, and in particular the highly-technical stand-alone disclosure requirement, have proven ripe for standing-based challenges because of the lack of concrete injury, especially where the plaintiff simply alleges that the disclosure contains some “extraneous” information and is thus technically deficient, despite the plaintiff’s acknowledgement that the employer provided a disclosure and the plaintiff authorized the background check in writing.
The law continues to develop rapidly in this area, with courts across the nation wrestling with the standing issue in light of the Supreme Court’s decision in Spokeo, Inc. v. Thomas Robins, 136 S. Ct. 1540 (2016), which addressed the injury-in-fact requirements for Article III standing in federal court.
On February 24, 2017, in LeGrand v. Intellicorp Records, No. 1:15 CV 2091, 2017 U.S. Dist. LEXIS 26156, the Northern District of Ohio found that Article III standing did not extend to technical violations of the stand-alone disclosure requirement. Thus, the plaintiff’s claims based on those violations were dismissed because she had, in fact, received a disclosure (albeit, not a “stand-alone” disclosure) and had authorized her employer to seek a background report.
A few weeks later, the Northern District issued another decision under similar facts, again finding that the plaintiff did not have standing to assert violations of the stand-alone disclosure requirement. See Easley v. The Reserves Network, No. 1:16 CV 544 (N.D. Ohio Mar. 17, 2017) (“[T]he stand-alone disclosure clause, in particular, establishes only a procedural right to a document that consists ‘solely’ of the disclosure.”).
On February 21, 2017, in Smith v. Ohio State University (Case No. 2015-00919), the Ohio Court of Claims addressed the same issue with respect to state court jurisdiction. Following a remand from the Southern District of Ohio (which dismissed the case for lack of Article III standing in June 2016), the Court of Claims found that mere technical violations of the stand-alone disclosure requirement are insufficient to confer standing in Ohio state courts. This is an important decision because employees will prefer to file these FCRA claims in state court to avoid the Article III jurisdictional limitations of federal court. Smith puts this strategy in doubt. The court gave “great deference” to the United States Supreme Court and the Southern District of Ohio’s holdings on the standing issue. Because the plaintiffs had pleaded no particularized injury-in-fact, the plaintiffs did not have “statutory standing to pursue their claims in the absence of cognizable injury,” and the court dismissed the case.
Naturally, each case is decided on its given facts, but patterns are starting to emerge. The majority of courts (Ohio included) have found that a technical deficiency is insufficient to confer standing, although courts appear more likely to find a potential cognizable injury sufficient to defeat a motion to dismiss where the plaintiff alleges that no disclosure was provided and no authorization sought from the employee before the background check is procured. See, e.g., Ferguson v. DirecTV, LLC, No. 1:15-cv-2636, ECF No. 33 (N.D. Ohio Feb. 22, 2017) (denying motion to dismiss where plaintiff alleged that DirecTV “procured consumer reports of . . . subcontractors without first obtaining written authorization, without a permissible purpose and without making the required disclosures”). If a disclosure is provided and authorization obtained, even if they do not meet the technical dictates of the FCRA, courts are much less likely to find a “concrete” injury sufficient to meet standing requirements.
If you have any questions regarding LeGrand v. Intellicorp Records, Easley v. The Reserves Network, or Smith v. Ohio State University, or if you wish a copy of these opinions or otherwise have a question regarding standing issues or credit reporting laws in the employment context, please feel free to call any one of our Employment Practices Defense Practice Group Members.
This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.
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