I recognize this is a lengthier blog than I normally post, but it’s necessary so I can help employers help themselves.
The Ninth Circuit Court of Appeals issued an important opinion that is relevant not only to employers that are responsible for a providing job seekers with a compliant disclosure and authorization under the Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.), but also for their background screening vendors that may supply such templates to their employer clients.
In Gilberg v. California Check Cashing Stores (No. 17-16263) (“Opinion”) the Court addressed the issue of the required disclosure and authorization (D&A) and whether it is “clear and conspicuous” and “in a document that consists solely of the disclosure.” (FCRA, § 1681b(b)(2)(A)) At issue was whether the various state-mandated disclosures violated the FCRA’s “standalone document” requirement and are therefore extraneous. And, the Court also addressed the issue of what is “clear and conspicuous” under the FCRA. Specifically, the Court considered these questions:
Before diving into the Court’s Opinion, let’s briefly describe a key employer obligation under the FCRA when conducting a background check for employment purposes. Obligation—employers need to provide the job applicant with a D&A that is a standalone, clear and conspicuous disclosure of its intention to conduct a background check. Employers must advise job applicants of the background check when using the services of a third-party background screening company and must capture the job applicant’s consent for said check. As recent settlements demonstrate, this requirement is not always resonating with employers. Consider settlements and/or on-going litigation against airline carriers ($2.3 million dollars), retail stores (granted class certification), and healthcare providers ($1.3 million) to list a few examples.
Since neither the Federal Trade Commission nor the Consumer Financial Protection Bureau have provided users of consumer reports (aka “background check reports”) with a standard D&A we look to the FCRA itself for guidance as well as case law. And in this area, the case law is evolving. We know, for instance, that inclusion of any type of a release of liability/liability waiver in a D&A is considered extraneous information because it violates the standalone disclosure requirement. (See, Syed v. M-I, LLC, 853 F3d 492 (9th Cir. 2017) Now, layer in state-mandated disclosures. Previously, D&A’s included state-mandated disclosures related primarily to receiving a copy of the report (e.g., California, Minnesota, Oklahoma). And over time, additional state disclosures were added. That is now definitively a thing of the past. The same 9th Circuit as in the Syed case is saying that “a prospective employer violates FCRA’s standalone document requirement by including extraneous information relating to various state disclosure requirements in that disclosure.” (Opinion at p. 4).
Takeaways for Employers
The lead plaintiff in this case had no criminal history, worked for CheckSmart Financial for a period of time, and then voluntarily terminated her employment. After that, she pursued this putative class action alleging violations of the FCRA and state law. (Opinion at p. 9) And, since this is at the appellate level, note that the district court entered summary judgement against the plaintiff and sided with CheckSmart Financial that the D&A was compliant.