Pre-Adverse Action Failures Sufficient for Lawsuit to Proceed

A recent decision from the Middle District of North Carolina provides employers with ample reason to double-check their adverse action compliance.

Fair Credit Reporting Act: A Refresher

As a brief refresher, the Fair Credit Reporting Act (FCRA) requires employers to follow a two-step process when considering taking an adverse action against an individual based in whole or in part on a consumer report (i.e., background report). Under the FCRA, an employer must provide a pre-adverse action letter and include a copy of the consumer report along with “A Summary of Your Rights Under the Fair Credit Reporting Act”. The employer must then wait a reasonable amount of time before sending a final adverse action letter (if the decision becomes final).

The Case and Decision

In this case, the plaintiff applied for employment with the defendant employer and received a pre-adverse action letter—but did not receive a copy of the consumer report. The plaintiff then filed suit alleging the employer violated the FCRA.

In response, the employer claimed the plaintiff did not have standing arguing there was no concrete injury suffered. Disagreeing with the employer, the court determined that the plaintiff did not receive a copy of the report, was unaware that the report contained several inaccuracies and consequently lost out on the job opportunity. Based on those factors, the court determined the plaintiff had sufficient standing to pursue the suit.

Concluding Thoughts

Over the past several years, employers across the country have faced countless lawsuits over their compliance with the FCRA. We strongly encourage employers to review their adverse action letters and procedures with qualified legal counsel based on this continuing litigation trend.