It is entirely common for employers to seek consumer reports and background checks on prospective and current employees. However, the law governing how the employer can go about this can be tricky, and if done wrong leads to a massive legal nightmare. The most recent example of this is Gilberg v. Cal. Check Cashing Stores, LLC.
When seeking these consumer reports, employers are required to provide disclosure and obtain consent from the prospective or current employee. The manner in which the disclosure and consent are handled is strictly proscribed by the Fair Credit Reporting Act ("FCRA").
One issue employers run into trouble with is the disclosure's "stand-alone" requirement in the FCRA. The FCRA mandates the disclosure be "clear and conspicuous" and that the disclosure form is a standalone document that "consists solely of the disclosure." For employers, it is not always clear what these terms mean and many have run into legal trouble for violating the FCRA with disclosure forms they thought complied with the law, but which courts determined did not. This is what happened in Gilberg.
In Gilberg, the disclosure included additional information relating to state disclosure requirements. The disclosure form at issue is found in the court's opinion, but briefly can be described as containing the initial FCRA mandated disclosure followed by additional disclosures required by various state laws. For example, the form had additional paragraphs with disclosures labeled "New York applicants or employees only" and "California applicants or employees only."
The question was whether the additional state disclosure material violated the FCRA's standalone requirement. The Ninth Circuit determined it did.
In coming to its decision, the Ninth Circuit also referred to the prior case of Syed v. M-I, LLC, wherein the court had determined that release of liability language in the disclosure violated the FCRA. Building on this, the Ninth Circuit found that even in this case, where the additional information beyond the FCRA disclosure included disclosure notices for various states, the form still violated the FCRA.
Accordingly, it seems after Gilberg that the FCRA's standalone requirement applies to the FCRA mandated disclosure specifically and solely. This disclosure must be clear and conspicuous and standalone. Any other information, whether relating to liability release or any other form of disclosure, must be separate from the FCRA disclosure itself.
This change impacts businesses across the Ninth Circuit and will likely require many companies seeking consumer reports for applicants and employees to change their disclosure form. In deciding whether or not to do so, and how, it's clear that employers should have an experienced legal team that can ensure the disclosure will not run afoul of the FCRA and thus avoid a Gilberg-like lawsuit.