Be Wary of Background Check Disclosures with State Information

For employers who operate in the Ninth Federal Circuit (whose decisions create legal precedent for federal courts located Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington), now may be a good time to review your Fair Credit Reporting Act disclosure and authorizations.

Less than one month after the New Year began, the Ninth Circuit Court of Appeals issued its decision in Gilberg v. California Checks Cashing Stores, with relatively far-reaching implications.

For readers who may not be familiar with the Fair Credit Reporting Act (the “Act”), it is a federal law intended to protect consumer privacy rights, which can even extend to the realm of employment.  Among other things, the Act requires employers who obtain consumer reports (e.g., criminal background checks, credit reports, driving records, etc.) to provide job applicants with “clear and conspicuous disclosure[s]” in a document consisting “solely” of the disclosure before they can obtain any such report.  The disclosure informs applicants of the purpose the employer hopes to obtain the report, the applicant’s rights during the process, and also obtains the applicant’s authorization.

As issue in the Gilberg case was the disclosure forms used by CheckSmart in California, and the Ninth Circuit found plenty it did not like.  For reference, here are two of the provisions the Court examined:

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.

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Minnesota and Oklahoma applicants or employees only: Check this box if you would like to receive a free copy of a consumer report if one is obtained by the Company.

The Ninth Circuit found the first provision listed above to be anything but clear in what it was meant to communicate to an applicant.  For example, it failed to explain how the authorization was “all-encompassing” and how that would affect the applicant’s rights.  The Court also believed the second half of sentence lacked a subject and was incomplete.

The Ninth Circuit found the second provision listed above to be just as likely to “confuse” a California applicant as it would be to “inform” them because it makes references to applicants in other states and did nothing to benefit advise the California applicant of anything useful.

As a result, the Court determined that CheckSmart’s forms were in violation of both the Act and the California Investigative Consumer Reporting Agencies Act (ICRAA), California’s own consumer protection law with provisions nearly identical to its federal counterpart.

If you have questions about the Fair Credit Reporting Act, the ICRAA, or your organization’s methods of obtaining consumer reports, contact your Employers Council representative.