Running background checks on employees and applicants provides several pitfalls for employers to be wary of, and two cases out of the Ninth Circuit go into depth regarding specific requirements imposed on many background checks by the Federal Fair Credit Reporting Act (“FCRA”). These cases provide a good reminder for employers regarding the FCRA’s requirements, which have been the target of increased litigation over the past few years.
The FCRA and Background Checks
The FCRA is a federal statute which provides – in addition to other requirements – certain prerequisites that must be met prior to running a “consumer report” on an employee or applicant. Notably, even simple employee background checks may fall under the definition of a consumer report.
One of the FCRA’s requirements is that the subject of the report be given a written disclosure “that a consumer report will be obtained for employment purposes.” Failure to provide this required disclosure carries a civil penalty, and plaintiffs’ attorneys generally bring class-action lawsuits against employers who violate the FCRA.
The two Ninth Circuit cases discussed below go into detail regarding two specific aspects of the required FCRA disclosure language.
Gilberg v. California Check Cashing Stores, LLC
In addition to disclosure language required under federal law, states may impose additional requirements. For example, under Minnesota law, the subject of a consumer report must be provided with a “box” they can check to receive a free copy of the results of the report.
In Gilberg v. California Check Cashing Stores, LLC, 913 F.3d 1169 (9th Cir. 2019), the Ninth Circuit held that any disclosure language required under state law must be kept in a separate document from the required federal disclosure. The Court based its holding on the fact that the FCRA requires its disclosure to be presented “in a document that consists solely of the disclosure,” meaning any information required by state law must be kept separate.
Walker v. Fred Meyer, Inc
In another recent case, Walker v. Fred Meyer, Inc. 953 F.3d 1082 (9th Cir. 2020), the Court analyzed a similar issue with respect to the FCRA’s requirement that the required federal disclosure be limited to a “disclosure . . . that a consumer report will be obtained for employment purposes.” The employer in Walker included information regarding additional privacy rights an employee had under the FCRA with its disclosure language. The Court noted that even though the information included was 1) accurate, 2) “helpful” to the consumer, and 3) added in good faith by the employer, it was still a violation to include any extraneous language not limited to the fact that a consumer report was going to be obtained for employment purposes.
Why it Matters
Although the Ninth Circuit decisions discussed above are only binding precedent on federal district courts within that Circuit (i.e. Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington), it is possible that other Courts may adopt the logic in Gilberg and Walker. As a result, there are a few takeaways for employers to consider with respect to the disclosure and authorization forms used to conduct background checks:
- Employers should ensure that they are providing employees and applicants (meaning individuals who have received conditional offers of employment) with a FCRA-compliant disclosure, as well as with any additional disclosures which may be required under applicable state law.
- The language in any FCRA disclosure should be limited to only a disclosure that “a consumer report will be obtained for employment purposes,” and any other information should be set forth in a completely separate document.
- Any information required under state law should be provided in a separate document as well.
Bottom Line
These cases highlight that employers must meet strict requirements in order to comply with the FCRA when conducting background checks on applicants and employees. Indeed, including extraneous information in the federal FCRA disclosure, even if it is helpful or required under a related state law, may still be a violation that could lead to liability under the FCRA.