Class action claims against employers for seemingly technical violations of the Fair Credit Reporting Act (FCRA) continue to gain momentum, reminding employers to carefully review their background check forms. In the most recent example, the Ninth Circuit dealt a significant decision holding that state-specific disclosures in a background check disclosure form violated FCRA requirement that disclosures be provided in a “standalone document” and in a “clear and conspicuous” manner.
Gilbert v. Cal. Check Cashing Stores, LLC, No. 17-16263 (9th Cir. January 29, 2019), the employer provided a prospective applicant a background check form, which contained required disclosures under FCRA and similar disclosures required under various state laws (including California law). The prospective employee brought a putative class action against the employer, claiming the form did not make proper disclosures under FCRA or California law, the Investigative Consumer Reporting Agencies Act (ICRAA).
Relying on prior California case law, the employer argued that the form met FCRA’s requirement that the disclosure be provided in a standalone document because the state law disclosures were closely related to the FCRA disclosures and furthered the purposes of FCRA. Although the district court adopted this reasoning and dismissed the claims, the Ninth Circuit disagreed. According to the Ninth Circuit, FCRA’s plain language requires FCRA disclosures to be in a document consisting solely of the FCRA disclosures. Although the state-specific language was similar, the Ninth Circuit declined to read an exclusion into FCRA to allow employers to expand what can be included in a disclosure form.
The Ninth Circuit also held that the form was not clear for two reasons:
- The combination of state and federal disclosures would confuse a reasonable reader of the form.
- It contained language a reasonable person would not understand, including a failure to explain how the authorization would affect an applicant’s rights. It also contained language suggesting that there may be some limits on the all-encompassing nature of the authorization without identifying what those limits might be.
Because ICRAA contains requirements similar to FCRA’s for “clear and conspicuous” disclosures, the court also found violations of ICRAA as to the clarity of the form. The case was remanded to the district court for further proceedings.
While it remains to be seen whether courts outside of the Ninth Circuit will adopt this standard, employers who hire across the country should evaluate their background check forms, including forms provided by third-party background check vendors, to ensure state-specific disclosures are excluded from any FCRA-required forms, particularly those that may be used within California or other states within the Ninth Circuit. Employers should also ensure any background check forms disclose information under FCRA and state law in a manner that is likely to be understood by prospective employees.