The court found that CheckSmart’s form violated both FCRA and ICRAA’s requirements because it combined the mandated disclosures into one document. Such combination, the court held, failed to meet both statutes’ “standalone” and “clear and conspicuous” directives.
In Gilberg v. Cal. Check Cashing Stores, LLC, No. 17-16263, 2019 WL 347027 (9th Cir. Jan. 29, 2019), a unanimous three-judge panel of the Ninth Circuit Court of Appeals held that an employer’s background check disclosure form violated federal and California law because all of the required disclosures were contained in one document. The Ninth Circuit found that employers should instead use two standalone forms: one addressing the disclosure and consent requirements under the federal Fair Credit Reporting Act (FCRA); and another addressing any applicable state law requirements, such as California’s Investigative Consumer Reporting Agencies Act (ICRAA).
Factual and Procedural Background
In the process of applying for a position at defendant CheckSmart Financial, LLC, plaintiff Desiree Gilberg signed a form entitled “Disclosure Regarding Background Investigation.” The form was seemingly designed to comply with FCRA and various state law equivalents by including all of the required disclosures in one document.
CheckSmart hired Gilberg, and she worked for the company for five months. However, Gilberg voluntarily terminated her employment and brought a putative class action alleging that CheckSmart’s “Disclosure Regarding Background Investigation” form did not constitute a proper FCRA disclosure or a proper ICRAA disclosure.
The district court dismissed Gilberg’s claims, and Gilberg appealed the district court’s ruling to the Ninth Circuit.
Applicable Law
Under FCRA, if an employer uses background checks in its hiring process, it must provide candidates with a “clear and conspicuous” disclosure explaining that it may seek to obtain a consumer report about the candidate. 15 U.S.C. § 1681b(b)(2)(A). The disclosure must be standalone, meaning that it is “in a document that consists solely of the disclosure.” Id.
California’s ICRAA is very similar, requiring employers to provide a “clear and conspicuous disclosure” to candidates before any consumer report is procured “in a document that consists solely of the disclosure…” Cal. Civ. Code § 1786.16(a)(2)(B). ICRAA further requires that the disclosure inform candidates of the purpose of the report; provide notice that any report may “include information on the consumer’s character, general reputation, personal characteristics, and mode of living”; identify the consumer reporting agency by name, address and telephone number; and define the scope of the investigation. Id.
The Ninth Circuit’s Decision and Reasoning in Gilberg
The Ninth Circuit agreed with Gilberg and reversed the district court’s decision. The court found that CheckSmart’s form violated both FCRA and ICRAA’s requirements because it combined the mandated disclosures into one document. Such combination, the court held, failed to meet both statutes’ “standalone” and “clear and conspicuous” directives. The court reasoned that the extraneous information included on the form could confuse employees and make it more difficult to understand. For this reason, the court clearly held that each required disclosure should only contain the information explicitly required by that statute.
What This Means for Employers
In light of this decision, employers who perform background checks in California, Arizona, Hawaii, Alaska, Idaho, Montana, Nevada, Oregon and Washington state should immediately review all disclosure and consent forms (including those utilized by their vendors) to ensure that these forms meet the “standalone” and “clear and conspicuous” requirements of FCRA, as interpreted by the Ninth Circuit in Gilberg, as well as any requirements under state laws pertaining to background checks for employment purposes. Employers who do not perform background checks in states within the Ninth Circuit also should consider making similar changes to their disclosure and consent forms to minimize the risk of a legal challenge on these grounds.
For More Information
If you have any questions about this Alert, please contact Jennifer A. Kearns, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
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