Blog Banner Image

The Modern Workplace

Federal Appeals Court Issues Rare FCRA Decision (Spoiler Alert: Its Not Good for Employers)
Posted in Hiring & Firing

The practice of running background checks on prospective and current employees has become commonplace in many industries. Companies should be careful, however, to ensure that their process complies with the hyper-technical requirements of the federal law governing the use of these background checks the Fair Credit Reporting Act (FCRA). Under the FCRA, before an employer may obtain a background check from a third party vendor for a fee, it must make a written disclosure to the subject of the background check. That written disclosure must be a stand-alone document that consists only of the statutory disclosure language. The subject of the background check must then provide written authorization for the employer to obtain a background check. Many states including Minnesota have their own procedural requirements, either tracking with the FCRA or potentially including add-on requirements.

During the last few years, the number of class action lawsuits against employers alleging non-compliance with the FCRA has significantly increased. The lawsuits often have challenged the employers background check disclosures, targeting disclosures that are included within the employers job application or, if separate, that include alleged extraneous text, such as a release of liability.

Recently, the U.S. Court of Appeals for the Ninth Circuit the federal appeals court covering Washington, Oregon, California, Nevada, Arizona, Hawaii, Alaska, Idaho, and Montana addressed noncompliance claims related to a FCRA disclosure form. In Gilberg v. Cal. Check Cashing Stores, the plaintiffs job applicants and employees brought a class action lawsuit alleging that the defendant employer violated the FCRA by including various state law disclosures in the same document as the FCRA disclosure. The district court dismissed the case, but the Ninth Circuit reversed and held that including these state law disclosures violated the FCRAs requirement to present the FCRA disclosure in a document consisting solely of the disclosure. The Ninth Circuit refused to recognize any implied exceptions to the stand-alone disclosure requirement. It also rejected the employers argument that providing the state law disclosures helped effectuate the purpose of the FCRA disclosure requirement, finding that much of the extraneous information, such as disclosures for states in which an individual does not live or work, is inapplicable and likely to confuse, rather than inform, applicants and employees. The Ninth Circuit also explained that a FCRA disclosure must be reasonably understandable to satisfy the laws clarity requirement and that, in the case at hand, the employers act of combining numerous state disclosures would confuse a reasonable reader.

This case is a reminder to employers that their FCRA forms must strictly comply with that laws requirements. Any deviation no matter how minor can expose an employer to the risk of an expensive lawsuit and potential liability. Thus, employers would be wise to consider arranging for a thorough review of their background check consent forms and notices. Employers should also ensure they are following state and local ban-the-box laws and other state laws and guidance related to the use of criminal history in making employment decisions.

Email LinkedIn Twitter Facebook

The information contained in this post is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.
















Blog Authors

Recent Posts