In the context of background screening processes, the Fair Credit Reporting Act (FCRA) protects job applicants and employees by ensuring transparency, fairness, privacy, and accuracy of information in the disclosure of consumer reporting agency files, including requests by employers. Through the FCRA, applicants and employees are entitled to be notified if information in their file has been used against them, and must give written consent for a consumer reporting agency to legally provide reports to any employer.
FCRA statutory violation claims have increased in recent months in both federal and state courts, testing federal “no injury, no standing” standards as it relates to the FCRA. In October of 2022, the Fifth District of the California Court of Appeals upheld a federal court’s decision regarding Limon v. Circle K Stores Inc., reaffirming that a FCRA violation claim in the state of California must demonstrate “concrete or particularized injury” to have legal standing, echoing FCRA standing requirements at the federal level. In this article, we’ll explore the particulars of the case and how it impacts HR policy and regulatory compliance for employers in the public and private sectors.
Federal Standing Requirements Reaffirmed
In the case, Ernesto Limon, a former employee of Circle K, alleged violation of FCRA’s “standalone disclosure” requirement, claiming that Circle K included “extraneous provisions” and did not adequately communicate his rights under the FCRA. Although Limon’s claim had been dismissed at the federal level on the basis that “concrete or particularized injury” could not be established, the case was brought to state appellate court, where the claim was also found to lack standing.
While applying for his position with Circle K, Limon received all appropriate FCRA disclosure forms, including a request of consent to obtain a background report, which required signature and a “box check” – both of which would verify consent to the background report. Although Limon was hired and worked for the company for one month, his subsequent FCRA violation claim hinged on the argument that Circle K did not include standalone disclosure documents or “clearly and conspicuously” indicate that a report would be obtained, or that liability would be released from the reporting agency.
At both federal and state levels, Limon did not successfully demonstrate that Circle K’s alleged violation of FCRA disclosure provisions concretely harmed him during or after his employment with the company. The California Court of Appeals justified its ruling by commenting that an informational injury that does not produce an “adverse effect” fails to confer legal standing to a litigant/claim related to the FCRA. Additionally, the state court’s decision aligns with the federal Article III standard that requires proof of concrete damage (and not a purely technical misstep or informational injury) as the basis for standing. Limon was unable to demonstrate that he suffered significant injury; as a result, his case was determined to lack “real interest.”
During the presentation of his case in state court, Limon cited past cases of statutory violation in which standing was granted on the basis of broader “public interest standing” (e.g. impacting individuals beyond the immediate plaintiff), but the court considered these cases exceptional and not applicable to Limon’s claim, particularly given the lack of personal injury, beneficial interest, and the existing precedent to only empower state agencies and officials (not individuals) to rectify issues with FCRA violations that have a wider public impact. Similarly, Limon attempted to draw a distinction between FCRA statutory “penalties” vs. “damages,” claiming that Circle K should be subject to a monetary penalty despite the absence of personal damage from the alleged FCRA violation. The state court ruled that a plaintiff affected by an FCRA violation can only claim “damages” if he is injured, and “penalties” are designed to reprimand/fine those that willfully commit FCRA violations or whose FCRA violations are concretely and evidently injurious.
Limon’s case was ultimately found to lack standing on the basis of his signed consent of the background check, his lack of injury (financially, reputationally, or in terms of his privacy rights), and his acknowledgement that the report was accurate, did not contain damaging content, and was provided to him within established timelines.
Important Considerations for Employers
Although the ruling in Limon v. Circle K Stores Inc. further demonstrates the tendency of state courts (in this case California’s) to align with federal standing law – preventing the conferral of standing to non-injurious statutory claims – these types of cases are likely to continue to appear across the United States.
For this reason, employers should optimize their FCRA compliance practices and remain aware of the local and state standing requirements that exist within their jurisdiction(s). FCRA penalties alone can cost $100-$1,000 per violation, in addition to substantial attorney fees, legal costs, and punitive damages. Different states and municipalities have their own versions of consumer reporting laws, which can mirror or sometimes extend beyond federal standards. As we’ve explored with Limon v. Circle K Stores, a small misstep regarding a standalone disclosure requirement (or another technical misstep/informational injury) can bring unwanted attention and long-term legal costs, even if the case is ultimately denied standing. In other jurisdictions or circumstances, these or similar issues could lead to federal penalties or the assignment of punitive damages.
Ensure Lasting Compliance and Responsible HR Policy with The Orsus Group
If you’re an employer regularly conducting background screenings, it’s imperative to review and update your employee handbook, new hire materials, and HR policies each year to protect your organization and adapt to regulatory changes. The Orsus Group provides comprehensive background screening services alongside HR consulting that facilitates informed and legally compliant hiring practices. We prioritize informational accuracy as we help you evaluate the best possible candidates for your organization.
Ready to upgrade your HR strategy and optimize your background screening processes? Contact us today to get started.