On January 29, 2019, the Ninth Circuit Court of Appeals held that a prospective employer does not satisfy the Fair Credit Reporting Act’s (“FCRA”) stand-alone disclosure requirement when it provides job applicants with a disclosure that also contains various state and federal disclosure requirements. This is a significant development, and one which employers and consumer reporting agencies performing background checks in the Ninth Circuit’s jurisdiction will want to be aware of.

Under the FCRA, employers who obtain a “consumer report” (i.e., background check) on a job applicant must provide the applicant with a “clear and conspicuous disclosure” that the employer may obtain such a consumer report “in a document that consists solely of the disclosure.” This second requirement is frequently referred to as the “stand-alone disclosure” requirement. However, because “stand-alone” is not defined in the FCRA, federal courts are split on the issue of what constitutes a stand-alone disclosure.

In a previous decision, Syed v. M-I, LLC, the Ninth Circuit held that the defendant employer violated the FCRA when it procured the plaintiff job applicant’s consumer report after including a liability waiver within the required stand-alone disclosure. 853 F.3d 492 (9th Cir. 2017). The Court noted that the statutory language was clear that the disclosure document must consist “solely” of the disclosure and held that the employer’s decision to include a liability waiver within the disclosure constituted a willful violation of the FCRA.

In Gilberg v. California Check Cashing Stores, issued on January 29, 2019, the Ninth Circuit reinforced that the stand-alone disclosure requirement means what it says, finding that the inclusion of arguably innocuous information regarding an applicant’s rights under various state laws and a “Notice Regarding Background Investigation” (“Notice”) and “Summary of Your Rights Under the Fair Credit Reporting Act” (“Summary”) was extraneous information that violates the stand-alone disclosure requirement. The defendant employer argued that Syed was not applicable here since the extraneous information in that case was a liability waiver, which did “not comport with the FCRA’s basic purpose” because it pulled “the applicant’s attention away from his privacy rights protected by the FCRA by calling his attention to the rights he must forego if he signs the document.” Here, the employer argued, the extraneous information consisted of state-mandated disclosure information and FCRA notices that only furthered the FCRA’s purpose. The Court disagreed, holding that Syed was not limited to liability waivers, but also extended to the situation here, where a prospective employer includes extraneous information relating to various state disclosure requirements in the stand-alone disclosure.

Additionally, the Ninth Circuit held that the employer’s disclosure, while “conspicuous,” was not “clear,” and therefore violated the “clear and conspicuous disclosure” requirement. The Court reasoned that the disclosure would confuse a reasonable reader because it combined federal and state disclosures – for example, referring to “New York and Maine applicants or employees only” as part of the state-mandated disclosures.

What does this decision mean for employers? At least in the Ninth Circuit, employers (and consumer reporting agencies) should be extremely conservative and careful about including any language in the stand-alone disclosure other than, as the statutory language mandates, “a clear and conspicuous disclosure . . . that a consumer report may be obtained for employment purposes.” 15 U.S.C. § 1681b(b)(2)(A)(i). The FCRA also expressly permits a written authorization by the employee to be included in the stand-alone disclosure. The Ninth Circuit emphasized that it will create no implicit exceptions to the stand-alone disclosure requirement on top of this lone express exception.

As a reminder, there is a new “Summary of Your Rights Under the Fair Credit Reporting Act” form (see Joseph A. Kroeger and Audrey E. Chastain, "Employers Will Be Required to Utilize a New 'A Summary of Your Rights Under the Fair Credit Reporting Act' Form," Sept. 26, 2018). If an employer wishes to provide this new Summary to applicants at the application stage, the Summary will need to be provided separately from the stand-alone disclosure and should not be referenced in the stand-alone disclosure. Additionally, any state-mandated disclosures regarding an applicant’s rights should also be removed from the stand-alone disclosure and provided separately. Employers may want to carefully review and update their background check disclosure forms to be consistent with the recent decision.

Notably, the decision also rejected a frequent argument employed by plaintiffs in FCRA class actions. The plaintiff argued that the inclusion of the disclosure along with a three-page employment application packet, in and of itself, violated the stand-alone disclosure requirement, because the disclosure was combined with the application. The Ninth Circuit summarily rejected that argument, finding that the disclosure document was distinct from the employment application packet. Thus, employers should consider taking steps to be clear that the FCRA stand-alone disclosure form is distinct from any employment application materials (such as by using different page numbering and a different title at the top of the disclosure). The Ninth Circuit’s decision should help employers rebut any argument that the mere presentation of the disclosure along with the employment application, whether in hard copy or an electronic set of forms, would violate the FCRA’s stand-alone disclosure requirement.

For more information, the Gilberg decision can be found here.