Ninth Circuit: Fair Credit Reporting Act Pre-Adverse Action Notice Is a Procedural Requirement and Not an Actionable Right

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July 13, 2018

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In Dutta v. State Farm, the Ninth Circuit Court of Appeal stated that an employee did not have standing to sue a prospective employer for failing to comply with the pre-adverse action notice requirements under the Fair Credit Reporting Act (FCRA). The FCRA requires employers to give applicants notice before they take any adverse employment action based on the results of a consumer report (e.g., credit report). This requirement is meant to give the applicant an opportunity to contest or correct information in the credit report. After providing such pre-adverse action notice and certain timing requirements are met, an employer may then take the adverse action if it still intends to do so.

In Dutta, State Farm verbally communicated the applicant’s rejection for employment based on his credit report, even though the applicant had not yet received the pre-adverse action notice mailed to him. The Ninth Circuit stated that the pre-adverse action notice requirement is a procedural protection that is not actionable without evidence of actual harm or substantial risk of harm. There, key information in the credit report relied on by State Farm in refusing to hire Dutta was accurate. Thus, without more, Dutta could not sue for a mere procedural violation. Employers should note, while State Farm may have been successful in this case, it could have ended in a different result if the applicant could in fact allege or show that he was prejudiced by the procedural failure.

Action Items

  1. Implement procedures consistent with adverse action requirements under the FCRA.
  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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