Strict Requirements for Background Checks: Federal and State Mandated Disclosures Must Stand Alone in Separate Documents

California employers who use background checks in making personnel decisions about employees and job applicants must comply with a variety of strict legal requirements, including the federal Fair Credit Reporting Act (“FCRA”) and the California Investigative Consumer Reporting Agencies Act (“ICRAA”). Background checks may take a variety of forms, but common examples include criminal records checks, litigation history, and driving records. The Ninth Circuit Court of Appeals recently decided that an employer violates both federal and state law by combining the disclosures mandated by the FCRA and ICRAA into a single document, even though the disclosures are substantially similar.  

In Gilberg v. California Check Cashing Stores, LLC, CheckSmart provided Desiree Gilberg with a job application packet that included a one-page disclosure form to obtain her credit report and criminal background report. The form included disclosures required not only by the FCRA, but also required by equivalent laws of various states in which CheckSmart operated its stores, such as California, Oregon, and Washington, among others. After Ms. Gilberg signed the disclosure form and her background check cleared, CheckSmart hired Ms. Gilberg, who worked for the company for the next five months. Ms. Gilberg then resigned and filed a class action lawsuit alleging that CheckSmart failed to provide proper FCRA and ICRAA disclosures.

The FCRA prohibits an employer from obtaining the consumer report of an employee or job applicant without first obtaining that person’s consent and providing the employee or job applicant with certain disclosures. The disclosures must be “clear and conspicuous” and included “in a document that consists solely of the disclosure.” The latter requirement is commonly referred to as the “standalone document” requirement. Substantially similar requirements are set forth in the ICRAA.  

The Ninth Circuit held that an employer violates the “standalone” document requirements of the FCRA and ICRAA by including in the same disclosure form extraneous information relating to the disclosures mandated by other jurisdictions. In other words, employers must use separate documents for the FCRA and ICRAA disclosures that exclusively contain only the information required by each statute.  

Focusing on the FCRA, CheckSmart had argued that the extraneous information was permissible because it consisted of information that furthers rather than undermines the purpose of the FCRA. The Ninth Circuit declined to create such an implied exception, however, and found that extraneous information beyond what the FCRA itself violates the standalone document requirement. The court also found that the presence of the extraneous information referring to rights that are not part of the FCRA-mandated disclosures was “as likely to confuse as it was to inform” the reader. Thus, combining the federal and state disclosures into a single document not only failed to further the FCRA’s purpose, but it also violated the FCRA’s requirement that the disclosures must be “clear.” 

The Gilberg decision follows the Ninth Circuit’s earlier opinion in Syed v. M-I, LLC, holding that an employer violated the FCRA’s standalone document requirement when it included a liability waiver in the same document as the statutory mandated disclosure. The court concluded that the FCRA meant what it said: the required disclosure must be contained within a document that consists “solely” of the disclosure.

Both the Gilberg and Syed decisions demonstrate how courts strictly construe the disclosure requirements of the FCRA and ICRAA. Employers who use background checks should therefore carefully assess whether their disclosures are legally compliant. For example, the FCRA and ICRAA disclosures should each appear in separate, standalone documents, even though it may seem to be more efficient to combine the disclosures into a single document. Any extraneous information, no matter how closely related to the statutory mandated disclosures, should be excluded from each disclosure form. The language used in the disclosure form must also be clearly worded and appear in a conspicuous manner that is “readily noticeable” to the reader. For example, employers are well advised to avoid legalese, use headings formatted in bold and underline, and apply a type size that is greater than 8.  

The use of background checks in making employment decisions continues to raise complicated legal issues and is fraught with risk. Accordingly, employers should proceed with caution. If you have questions regarding background checks, the hiring process, or any other issue related to employment law, please contact one of our attorneys:

Daniel F. Pyne III
Ernest M. Malaspina
Richard M. Noack
Karen Reinhold
Shirley Jackson
Sean Bothamley

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