The Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681b, requires employers to provide job applicants and employees with a “clear and conspicuous” disclosure that a background check will be conducted for employment purposes prior to its occurrence. The FCRA also requires the disclosure to be made in a “document consisting solely of the disclosure”—the so-called “stand-alone” requirement. These requirements, on which we’ve reported before,[1] have generated significant litigation and spawned a cottage industry of class actions in which plaintiffs seek statutory damages (of between $100 and $1,000 per violation) against employers for using allegedly non-compliant disclosures.
The Ninth Circuit’s decision in Gilberg v. California Check Cashing Stores, LLC, No. 17-16263, 2019 WL 347027, at *5 (9th Cir. Jan. 29, 2019), will surely add more fuel to this fire. The court in Gilberg applied the FCRA’s “stand-alone” requirement literally, holding that inclusion of specific state-law disclosure language in a FCRA background check disclosure form violates the stand-alone requirement. The form at issue contained specific check boxes and disclosure language that were directed to residents of specific states (e.g., “New York and Maine applicants and employees only”). The court took issue with the fact that the disclosure “refer[red] not only to rights under FCRA and [California law] applicable to [the California-based plaintiff], but also to rights under state laws inapplicable to [her].” 2019 WL 347027, at *5.
The court also took issue with the fact that the authorization portion of the document—which the FCRA expressly permits to be included within a stand-alone disclosure—referenced “extraneous documents that are not part of the FCRA-mandated disclosure.” The court specifically objected to a reference to a “Notice Regarding Background Investigation”—an apparent misnomer for the “Disclosure Regarding Background Investigation” that preceded the authorization—and, remarkably, a reference to a “Summary of Your Rights Under the Fair Credit Reporting Act” form. This latter form is a government-issued template that the FCRA actually requires be disclosed to consumers in numerous circumstances and is often provided to job applicants and employees on whom background checks will be conducted. In short, it appears the court faulted the employer for misstating the name of the stand-alone document itself (“Notice” v. “Disclosure”) and for including a memorialization of applicants’ and employees’ receipt of a government-issued form that actually explains their FCRA rights. See id.
The court’s unforgiving formalism did not stop there. The court also held that the disclosure was not “clear” because it contained the following language:
The scope of this notice and authorization is all-encompassing; however, allowing CheckSmart Financial, LLC to obtain from any outside organization all manner of consumer reports and investigative consumer reports now and, if you are hired, throughout the course of your employment to the extent permitted by law.
2019 WL 347027, at *6. The court stated that “[t]he beginning of this sentence does not explain how the authorization is all-encompassing and how that would affect an applicant’s rights” and that “[t]he second half of the sentence, following the semicolon, lacks a subject and is incomplete” because “[i]t suggests that there may be some limits on the all-encompassing nature of the authorization, but it does not identify what those limits might be.” Id. The court did not appear to consider whether the use of a semicolon, rather than a comma, was a mere typo; indeed, replacing the semicolon with a comma would appear to resolve the court’s grammatical objection and provide the explanation the court believed was lacking. Thus, it appears that a misplaced semicolon was sufficient to render the language noncompliant with the FCRA’s “clear” disclosure requirement.[2]
Although the strict approach of the panel in Gilberg may lead to en banc review by the full Ninth Circuit or reversal or limitation by the U.S. Supreme Court, it is currently controlling law in the circuit and will provide a basis for district courts in other circuits to scrutinize employers’ pre-background check FCRA disclosures even more closely. Given that the FCRA’s statutory damages provisions invite large and expensive class actions, employers should tread extremely carefully in this area, and take immediate steps to ensure that their FCRA disclosure forms are not subject to the same criticisms articulated by the Ninth Circuit panel in Gilberg. We are ready and able to assist employers with revising their FCRA disclosure forms to maximize compliance and minimize legal exposure.
- See our April 2, 2015, June 22, 2015, October 8, 2015, January 25, 2017, January 31, 2017 and May 4, 2017 NP Privacy Partner blog posts).
[Back to reference] - The court also opined that the disclosure was not “clear” because it contained (among other similar examples) the following state-specific disclosure language: “New York and Maine applicants or employees only: You have the right to inspect and receive a copy of any investigative consumer report requested by [the employer] by contacting the consumer reporting agency identified above directly.” The court held that “[a] reasonable reader might think that only New York and Maine applicants could contact the consumer reporting agency to get a copy of the report.” 2019 WL 347027, at *6. Apparently, it did not matter to the court that the main text of the disclosure also advised all recipients that they had “the right, upon written request made within a reasonable time after receipt of this notice, to request whether a consumer report has been run about [them], and the nature and scope of any investigative consumer report, and request a copy of [their] report.” Id. at *2.
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