Can Applicants Sue Over the Pre-Adverse Action Notice Requirement?

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All Employers with Employees in AR, DE, IA, MN, MO, NE, ND, NJ, PA, SD

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September 6, 2018 and September 10, 2018

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Several Court of Appeal cases have come down recently on whether or not an applicant can sue an employer for failing to provide a pre-adverse action notice as required under the Fair Credit Reporting Act (FCRA). There is a split in the courts between the Ninth Circuit (applicants cannot sue) and Seventh Circuit (applicants can sue). More recently, the Third Circuit issued its own ruling.

On September 10, 2018, in Long v. Southeaster Penn. Transp. Auth. (SEPTA), the Third Circuit Court of Appeal stated that employees have standing to sue for failing to receive a copy of their background report before the employer took adverse action under the FCRA, because employees have a right to see the report before adverse action is taken, regardless of whether there is incorrect information in the report. However, employees do not have standing for failure to receive information about their rights under the FCRA because it is a “bare procedural violation” and there was no concrete harm in that instance

Although not involving a pre-adverse action notice, the Eighth Circuit Court of Appeal recently discussed standing when bringing a claim under the FCRA. On September 6, 2018, in Auer v. Trans Union, LLC, the Eighth Circuit stated that sufficient injury must be alleged when claiming a violation of the FCRA. There, an employee claimed that her credit report was improperly obtained and retained in an unsecure manner. However, the employee admitted that she signed the employer’s authorization form to obtain her credit. Moreover, the court stated there was no corresponding concrete injury alleged, just speculation of potential injury, which is not enough to establish standing.

With courts analyzing FCRA violations differently, employers are recommended to closely follow FCRA’s authorization and notice requirements to avoid potential exposure, as this issue may ultimately be decided by the Supreme Court.

Action Items

  1. Review pre-adverse action procedures for consistency with regulatory requirements.
  2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2018 ManagEase

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