Employer Ensnared by 9th Circuit's FCRA Ruling

Author: David B. Weisenfeld, XpertHR Legal Editor

February 27, 2019

A prospective employer violated the Fair Credit Reporting Act (FCRA) by including extraneous information relating to various state disclosure requirements, the 9th Circuit Court of Appeals has ruled.

FCRA bans employers from obtaining a job applicant's consumer report without first providing the applicant with a standalone, clear and conspicuous disclosure of its intent to do so and without obtaining the applicant's written consent.

In Gilberg v. California Check Cashing Stores, the 9th Circuit found the employer's disclosure form violated FCRA because it was neither a standalone nor clear. The court explained that the required disclosure must be in a document consisting solely of the disclosure.

And, it rejected the employer's claim that its disclosure furthered FCRA's purpose rather than undermining it by including extra state disclosure information. The appellate court found this extra information was as likely to confuse as it was to inform. Therefore, it did not further FCRA's purpose in any way.

Writing for the appellate court, Judge Raymond Fisher also said, "The disclosure form contains language that a reasonable person would not understand." The offending language said:

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.

Judge Fisher noted that the beginning of the sentence did not explain how the authorization was "all-encompassing" and how that would affect an applicant's rights. Meanwhile, the court found the second half of it to be incomplete and suggesting there may be limits on the all-encompassing nature of the authorization. Because the court found this language confusing, it finds the disclosure unclear.

The ruling expressly applies only in the states within the 9th Circuit:

  • Alaska;
  • Arizona;
  • California;
  • Hawaii;
  • Idaho;
  • Montana;
  • Nevada;
  • Oregon; and
  • Washington.

However, Ogletree Deakins employment attorney Jennifer P. Woodruff, said she expects the impact of the decision to reverberate well beyond the 9th Circuit. "We're already seeing an uptick in work because everyone now wants their forms reviewed," said Woodruff, who is a member of the firm's Background Checks Practice Group.

"These [FCRA] lawsuits are not going away any time soon," said Woodruff. "It is critical that employers closely examine their background check disclosure and authorization forms to ensure they comply with the FCRA's requirements, and California requirements if applicable." Above all, she advises that the message from this ruling is to keep it simple when it comes to these forms, saying "less is more."