The Fair Credit Reporting Act (FCRA) can at times present a minefield for employers across industries to navigate when it comes to consumer reports used in candidate and employee background checks. The FCRA permits employers to obtain such reports for employment purposes only if:
(1) a clear and conspicuous disclosure has been made in writing to the consumer… in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and
(2) the consumer has authorized in writing… the procurement of the report.
See 15 U.S.C. § 1681b(b)(2)(A)(i)–(ii).
Given these disclosure requirements (and the statute’s provisions for recovery of statutory and punitive damages, attorneys’ fees, and costs), the FCRA has been a hotbed for litigation activity. Two recent Ninth Circuit opinions provide guidance for employers seeking to avoid potential missteps in this area.
First, in Walker v. Meyer, Inc., 953 F.3d 1082 (9th Cir. 2020), the plaintiff lost his supermarket job after his employer obtained a consumer report as part of his background check. The plaintiff responded by filing a class action against the supermarket, alleging that its FCRA disclosure form was “unclear” and “encumbered by extraneous information.” The Ninth Circuit had held in Gilberg v. Cal. Check Cashing Stores, LLC, 913 F.3d 1169 (9th Cir. 2019)—covered previously on this blog—that a FCRA disclosure must not contain any extraneous information beyond the disclosure required by the statute itself. Now, in Walker, the court began to draw the proverbial line regarding what constitutes “extraneous information.”
In a unanimous decision, the Ninth Circuit panel held that a FCRA disclosure may contain “some concise explanation” of what a consumer report entails, how it will be obtained, and the purposes for which it may be used. The standard endorsed by the court is whether the information “would further the purpose of the disclosure by helping the consumer understand the disclosure.” 953 F.3d at 1089. Taking each paragraph of the defendant’s form in turn, the court ruled that the first three were permissible as they detailed what constitutes a consumer report, disclosed the entity that would prepare the consumer report, and identified the information sources consulted. However, the court held that the form’s final two paragraphs (explaining the job applicant’s right to obtain information collected in preparing the consumer report) violated the FCRA, despite being “included in good faith in order to provide additional useful information,” because they could distract a job applicant’s attention away from his or her privacy rights under the FCRA.
The Luna Decision
A month later, in Luna v. Hansen and Adkins Auto Transport, Inc., 2020 WL 1969409 (9th Cir. Apr. 24, 2020), the court again addressed the FCRA’s disclosure requirements for consumer reports used in the employment context. The plaintiff had applied to work as a big rig truck driver for the defendant and received a multiform, multi-page application packet, which included separate FCRA disclosure and authorization forms. After his firing, the plaintiff filed a putative class action lawsuit, alleging that the defendant violated the FCRA by presenting its disclosure form to him together with its other employment application materials (such that its form did not consist “solely of the disclosure” as required by § 1681b(b)(2)(A)(i)).
The Ninth Circuit rejected the plaintiff’s theory—which it described as “more novel than most”—in a short, unanimous opinion. Although the court acknowledged its recent precedents holding that the FCRA requires a consumer report disclosure to be presented in “a document that consists solely of the disclosure” (see Syed v. M-I, LLC, 853 F.3d 492, 500 (9th Cir. 2017)), it refused to read into the statute a temporal separateness requirement as well. The court explained that “nothing in Syed can be read to prohibit an employer from providing a standalone FCRA disclosure contemporaneously with other employment documents.” 2020 WL 1969409, at *2. In other words, a FCRA disclosure must appear as a standalone document, but that standalone document can be provided to job applicants along with other materials. The Ninth Circuit also held that the defendant’s disclosure form met the FCRA’s “clear and conspicuous” requirement, pointing out it used bolded, underlined, and capital-lettered heading.
Both of these two recent decisions were handed down by the Ninth Circuit, but each may be deemed persuasive authority by federal courts confronting issues of first impression in this active area of litigation and provide guidance to employers regarding their FCRA disclosure obligations when obtaining consumer reports as part of employment background checks. Walker teaches that the information contained in a FCRA disclosure must be limited to that which assists a job applicant in understanding what a consumer report is, how it will be prepared, and for what purposes it will be used. And the Luna decision makes clear that, although a FCRA disclosure must appear in a standalone document, the employer may give that document to applicants along with other employment-related materials. In short, employers should provide in a stand-alone document only the disclosure language required by the FCRA, without trying to expand upon it, no matter how well-intentioned. With these decisions in mind, employers across industries should re-evaluate their FCRA disclosure forms to ensure they are in strict compliance with the text of the statute.
In addition to the federal disclosures required under the FCRA, employers evaluating job applicants in states that mandate separate disclosures under parallel state statutes (such as California and Vermont) should provide the state-law disclosures in standalone documents that are separate from the federal disclosures and other states’ disclosures.