Hunton Employment & Labor Perspectives

A magistrate judge in the U.S. District Court for the District of Oregon recently made findings and recommendations to dismiss a purported class action against Kroger subsidiary Fred Meyer.  The suit alleges that the retailer’s background check process for prospective employees violates the Fair Credit Reporting Act by both failing to properly disclose that a report will be run, and failing to comply with the statute’s procedural requirements before taking adverse action against an applicant.

In his report, Magistrate Judge Youlee Yim You recommended dismissing both FCRA allegations for failure to state a claim.  First, Walker contended that Fred Meyer’s presentation of an Offer Acceptance document at the same time as the background check Disclosure and Authorization forms was impermissibly confusing and duplicative, in violation of the FCRA’s “stand-alone” requirement, and that the Disclosure contained improper extraneous information.  The judge rejected these arguments, finding: (1) the Offer Acceptance and Acknowledgement were separate documents, and presenting them at the same time does not run afoul of FCRA; and (2) the Disclosure satisfied FCRA’s stand-alone requirements.  On the stand-alone issue, the judge found the Disclosure consisted of five paragraphs, and any additional information was not unlawful and was “limited to information that is ‘closely related to the FCRA disclosure.’”

Second, the judge also rejected Walker’s contention that Fred Meyer’s pre-adverse action notice runs afoul of the FCRA by directing applicants to contact the third-party background check provider, rather than Fred Meyer directly, with concerns about consumer reports.  Walker failed to state a claim because “FCRA does not require the employer to give the employee or applicant notice of a right to discuss the contents of the report directly with the employer.”

Additionally, Judge You found that Walker lacked Article III standing to pursue his pre-adverse action claim.  Walker argued he suffered an injury-in-fact because he lacked an “adequate opportunity to remedy issues contained in the consumer report,” because his pre-adverse action notice directed him to file a Dispute Form with the third-party background check vendor rather than directly with Fred Meyer.  The judge’s report rejects this argument, too, finding Walker was afforded an opportunity to dispute inaccuracies in his report, but he declined to do so within the required timeframe.  “[T]here is no statutory requirement that an employer must communicate directly with an employer” and therefore Walker “has not alleged any injury beyond the mere statutory violation and therefore lacks standing.”

If the magistrate’s report is adopted by the district court, the opinion will expand the precedent for more permissive interpretations of the Act’s disclosure requirements, and represent another employer win on post-Spokeo Article III standing grounds.