February 1, 2019

Ninth Circuit Clarifies FCRA Disclosure Requirements

The last few years have brought an increasing number of class action lawsuits filed against employers alleging non-compliance with the Fair Credit Reporting Act (“FCRA”). As part of an evolving trend of narrowly interpreting the FCRA’s “stand alone” disclosure and “clear and conspicuous” disclosure requirements, the Ninth Circuit in Gilberg v. California Check Cashing Stores, No. 17-16263 (Jan. 29, 2019), has held that employers may violate the FCRA and California’s Investigative Consumer Reporting Agencies Act (“ICRAA”) by including “extraneous” state law notices and potentially “confusing” language in background check disclosure forms.

The FCRA governs employer use of background reports conducted for employment purposes. The law requires employers to make a “clear and conspicuous” disclosure to applicants for employment that the employer may obtain a background report regarding the applicant. The disclosure must be made in “a document that consists solely of the disclosure.” ICRAA contains essentially identical disclosure requirements.

This is not the first time the Ninth Circuit has weighed in on background check disclosure requirements. Just two years ago, in Syed v. M-1, 853 F.3d 492 (2017), relying on the use of “solely” in the statute, the Ninth Circuit ruled that an employer acted willfully in violation of the FCRA when it included a liability waiver in its FCRA disclosures. Citing Syed, in Gilberg the Ninth Circuit again focused on the word “solely,” holding that FCRA’s use of the term prohibits “any surplusage” in the disclosure document, which included certain state-mandated information also on the disclosure form. 

In Gilberg, a former employee brought suit challenging the disclosure the employer provided to her before she was hired. The trial court deemed the disclosure FCRA and ICRAA-compliant. The Ninth Circuit reversed, holding the disclosure violated both the FCRA and the ICRAA, for two reasons. First, the disclosure violated the “stand alone” requirement in each law, because it included references to rights under state law that did not apply to Plaintiff, and to extraneous documents that were not part of the FCRA-mandated disclosure. Second, the Court held that although the disclosure was conspicuous, it was not clear because it combined federal and state disclosures and included multiple state-specific disclosures that made it difficult to understand which requirements apply, or do not apply, to applicants from any particular state.

What Employers Should Know Now

In the wake of Gilberg, employers should reexamine their background check forms and online screens and processes. Employers should ensure that the FCRA and ICRAA-mandated disclosures are contained in separate, stand-alone documents, entirely distinct from any other paperwork. Further, employers should make sure to use language that is clear, concise, and free from any errors or wording that could confuse an employee applicant about his or her rights under the FCRA or any comparable state laws.