March 28, 2019
All employers who use the services of a background checking agency to procure a background check report on an employment applicant should know that the federal Fair Credit Reporting Act (“FCRA”) requires that the applicant sign a written disclosure and an authorization before the report may be obtained. Specifically, to ensure the applicant understands what he or she is authorizing, the applicant must sign a “clear and conspicuous disclosure” that informs the applicant that the employer intends to obtain a “consumer report” for employment purposes. A “consumer report” includes any information by a reporting agency bearing on an individual’s credit standing, character, general reputation and other personal characteristics. Consumer reports may include credit reports, criminal records and driving records, among other sources of information.
To avoid confusion, the disclosure must be in a writing that “consists solely of the disclosure” (the “stand-alone document” requirement). The FCRA specifies one exception to the “stand-alone document” requirement, and allows both the disclosure and authorization, allowing the employer or its agent to procure the report, to be in a single document.
But just what information might an employer include in the required FCRA disclosure, and still remain in compliance with the FCRA? For example, California and some other states have their own background checking laws, with specific disclosure language as a pre-condition for obtaining background checks for employment purposes. Can those other states’ mandatory disclosure language be included in the FCRA disclosure? In Gilberg v. California Check Cashing Stores LLC, 913 F. 3d. 1169 (9th Cir, 2019) the Court of Appeals for the Ninth Circuit, of which California is a part, recently answered that question with a resounding: “No.”
The employer in Gilberg, like many other California employers, used a Disclosure form that combined the disclosure language required by the FCRA, with the additional disclosure language required by multiple other states’ laws, including the California Investigative Consumer Reporting Agencies Act (“ICRAA”). The Disclosure form provided contact information for the background checking agency, informed the candidate of the employer’s intention to obtain information from a background checking agency for employment purposes, and described the type of information that might be contained in the report. The form also included the following language:
California applicants or employees only: By signing below, you also acknowledge receipt of the DISCLOSURE REGARDING BACKGROUND INVESTIGATION PURSUANT TO CALIFORNIA LAW. Please check this box if you would like to receive a copy of an investigative consumer report or consumer credit report if one is obtained by the Company at no charge whenever you have a right to receive such a copy under California law.
Ms. Gilberg signed this Disclosure form, and after a background check report was procured and reviewed, Ms. Gilberg was hired. After working five months, Ms. Gilberg resigned and brought a class action lawsuit alleging the employer, CheckSmart, had failed to provide a proper stand-alone Disclosure, as required by the FCRA and ICRAA.
In opposing the claim, CheckSmart argued that the additional California specific language should be allowed because it consisted of state-mandated disclosure language, and therefore furthered the FCRA’s purpose of protecting consumers’ rights. The trial court agreed and granted summary judgment. However, on appeal, the Ninth Circuit disagreed, explaining that “purpose does not override plain meaning.” Because the FCRA required that the employment applicant sign a writing that consists solely of the FCRA disclosure, CheckSmart’s disclosure form did not satisfy the FCRA’s standalone document requirement. Further, because the statutory language for a stand-alone disclosure in the FCRA and ICRAA is identical, CheckSmart’s disclosure, which included both FCRA-compliant and ICRAA-compliant language in a single document, also violated the ICRAA.
California employers who have not reviewed and, as needed, updated their background checking disclosure forms since January 29, 2019, the date the Gilberg decision was published, should do so now to ensure their forms do not contain any extraneous or confusing language, other than the information specifically required by the FCRA (or separately, the ICRAA). In the past several years, the number of class action lawsuits brought for technical violations of the FCRA have expanded dramatically, and employers caught off guard with disclosure forms that contain disclosure language required by other states’ background checking statutes, in addition to the FCRA disclosure language, will find themselves vulnerable to litigation and potentially steep damages. For example, statutory damages for willful failure to comply with the FCRA can range from $100 to $1,000 per violation (with no proof of harm required). In those cases of provable harm, basic damages can be unlimited, and include an award of punitive damages and attorneys’ fees.
As a reminder, to the extent criminal conviction records are obtained in a background check report, the California Fair Chance Act requires that an individualized assessment must be conducted by the employer before a candidate may be rejected based upon information in the criminal conviction record, and a conditional employment offer can be withdrawn.
For further assistance with the recruitment and hiring process, including the administration of background checks, please contact your Ricketts Case employment counsel.
 The contact information of the agency is required to be in the Disclosure by the ICRAA but is not required by the FCRA until a later stage in the process.
 This language was required by the ICRAA.
|For further information, contact one of our employment attorneys.