In an important decision for employers that conduct background checks, on April 24, 2020, the U.S. Court of Appeals for the Ninth Circuit affirmed a summary judgment in favor of the employer in the case of Leonard Luna v. Hansen and Adkins Auto Transport, Inc.  The Court of Appeals held that an employer does not violate the Fair Credit Reporting Act (FCRA) by (i) providing a job applicant the disclosure at the same time as other employment materials; and (ii) failing to place the authorization in a standalone document.

FCRA Disclosure and Authorization

At issue was the FCRA required disclosure and authorization that employers must provide job applicants when conducting a background check through a third-party background screening company.  Plaintiff filed a class action alleging that the employer’s hiring process violated the FCRA’s disclosure and authorization requirements by presenting the disclosure together with other employment application materials. The FCRA requires that employers provide a “clear and conspicuous disclosure,” in writing, in a document “that consists solely of the disclosure” that a background check may be conducted AND the applicant authorizes such background check in writing.  The FCRA specifically states that the authorization may be combined with the disclosure. (FCRA § 604(b)(2)(A)(i) and (ii)).

Takeaways

The Court of Appeals made two important points relevant to the legal requirements placed on employers when conducting background checks.

1. The plaintiff in the case took issue with the employer’s practice of providing employees with the disclosure at the same time as, but as a separate document from, other employment documents.  The Court of Appeals held that while Section 604(b)(2)(A)(i) of the FCRA requires that a disclosure be in “a document that consists solely of the disclosure,” no authority suggests that a disclosure must be distinct in time from other documents, as well.  Thus, an employer does not violate the FCRA by presenting a standalone FCRA disclosure form contemporaneously with other employment application materials.
2. The Court of Appeals also addressed the plaintiff’s argument that the employer violated the FCRA by failing to put its authorization in a standalone document. The Court noted that while Section 604(b)(2)(A)(i) of the FCRA requires that the disclosure be in a standalone document, Section 604(b)(2)(A)(ii) of the FCRA only requires that the authorization be “in writing,” without specifying its format.

Conclusion

The Court of Appeals affirms that “an employer does not violate the Fair Credit Reporting Act by providing a FCRA disclosure with other employment materials, and by failing to place a FCRA authorization on a standalone document.” To read the opinion click here.  Therefore, as is permissible under the FCRA, an employer may combine the disclosure and the authorization into one document when presenting such to job applicants prior to conducting a background check.  And, the disclosure and authorization may be presented to job applicants along with other employment application materials.