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From Banking and Finance Law Daily, September 14, 2016

Employment screener’s failure to use middle name not willful violation

By Richard A. Roth, J.D.

An employment screening service provider who did not use a job applicant’s middle name to resolve an ambiguity in criminal records negligently violated the Fair Credit Reporting Act, but did not willfully violate the act, according to the U.S. Court of Appeals for the Sixth Circuit. The award of $75,000 in compensatory damages was appropriate for the applicant’s loss of six weeks of wages and his emotional distress, the court also decided (Smith v. LexisNexis Screening Solutions, Inc., Sept. 13, 2016, Rogers, J.).

The dispute concerns what LexisNexis Screening Solutions is required to do to satisfy the FCRA duty that it "follow reasonable procedures to assure maximum possible accuracy of the information" in the consumer reports it creates (see 15 U.S.C. §1681e(b)).

Screening procedure. The job applicant was required to reapply for his job when his employer was bought by another company. The new employer used Lexis for job screening purposes, and Lexis based its reports in part on Equifax credit reports. The employer wanted a "database report"—a report based on a search of Lexis’s database of criminal history that used data from courts and other government agencies.

In order to perform a database search, Lexis required the employer to provide the applicant’s first name, last name, and date of birth. The order form had fields for the applicant’s middle name and Social Security number, but Lexis did not require that information to be provided. The employer did give Lexis the applicant’s Social Security number, but not his middle name.

Screening results. The database search returned a criminal conviction under the name David Oscar Smith. This was close to the applicant’s name, David Alan Smith. Because Lexis did not receive the applicant’s middle name from the employer, and the criminal records did not include a Social Security number, it was not possible to conclude the record did not relate to the applicant. Lexis included the record in its report to the employer because the date of birth and the name David Smith matched the information it had been given.

It took the applicant six weeks to remedy the error, after which he was offered a job. His claimed damages consisted of six weeks of lost wages, harm to his reputation, and associated emotional distress. The jury decided that Lexis had both negligently and willfully violated its "maximum possible accuracy" obligation. It awarded the applicant $75,000 in compensatory damages and $300,000 in punitive damages, which the trial court deemed to be excessive and reduced to $150,000.

Lexis accuracy. The court said there was evidence that Lexis’s procedures at least met, and perhaps exceeded, industry standards. Lexis said that at the time the applicant’s report was created it performed about 10 million background checks each year, 99. 8 percent of which were never disputed. This was a "remarkably low" rate of false positive results, the court conceded.

Negligent violation. The evidence was enough to allow the conclusion that Lexis had been negligent, the court concluded. While Lexis had taken significant steps to reduce false positives, the name "David Smith" was "an exceedingly common first-and-last-name combination" that was shared by more than 125,000 Americans. A jury could have decided that, in such a case, Lexis should have asked for additional information, like the applicant’s middle name. The reasonableness of that request was demonstrated by the inclusion of a middle name field in Lexis’s own order form, the court pointed out.

The Equifax credit report named "David A. Smith," the court added. Lexis could have compared that credit report to the database search but did not do so.

Willful violation. On the other hand, Lexis had not willfully violated the FCRA because the inaccurate report did not result from the disregard of a high risk of harm of which the company should have known. There was no evidence that Lexis had made similar mistakes when screening other job applicants, its record showed its reports to be reliable, and it corrected the error shortly after the applicant complained.

Damages. The testimony of the job applicant and his wife was enough to justify the $75,000 compensatory damages award, the court also determined, even though his lost wages totaled only $2,640 and he did not receive any medical treatment. Relevant testimony included that the applicant:

  • was angry, stressed, and depressed because his unemployment caused financial problems;
  • had to borrow money from family members to pay his bills, which made him feel ashamed; and
  • was teased about the criminal record by at least one merchant.

The testimony was extensive, not simply conclusory, the court said. The jurors could identify with a person in that situation and could infer that it would be reasonable for a person to be distressed.

On the other hand, as Lexis’s violation was not willful, punitive damages could not be awarded.

The case is No. 15-2329/2330.

Attorneys: Thomas J. Piskorski (Seyforth Shaw LLP) for LexisNexis Screening Solutions, Inc. James A. Francis (Francis & Mailman, P.C.) and Ian B. Lyngklip (Lyngklip & Associates Consumer Law Center, PLC) for David Alan Smith. Alan Butler (Electronic Privacy Information Center) for amicus curiae.

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