The Fair Credit Reporting Act (FCRA) requires employers who obtain a consumer report on a job applicant to provide the applicant with a “clear and conspicuous disclosure” that they may obtain such a report (the “clear and conspicuous” requirement) “in a document that consists solely of the disclosure” (the “standalone document” requirement) before procuring the report. Because neither of these requirements are defined in the statute, they have been the subject of almost constant litigation in recent years. Most notably, the 9th Circuit has led the way in finding that an employer’s inclusion of a liability waiver in its disclosure form violates the standalone requirement. Now, in Gilberg v. California Check Cashing Stores, LLC, a panel of the 9th Circuit Court of Appeals has held that an employer’s inclusion of state law mandated requirements in the disclosure form provided to job applicants violates the standalone document requirement despite the fact that they were included in the form in an effort to assist the applicants in understanding all of their rights as it related to the background screen being obtained on them. In short, the panel was not moved by the employer’s argument that its additional disclosure of the applicable state laws “furthers rather than undermines FCRA’s purpose.” To the contrary, the panel held that “the presence of this extraneous information is as likely to confuse as it is to inform” and therefore, it does not further FCRA’s purpose. Instead, the panel noted that the only exception to the standalone document requirement is the one in the statute itself that permits the disclosure and authorization to be combined into a single document.
In addition, while agreeing that the disclosure form was “conspicuous” (despite being in 8-point font), the panel held that the it violated the clear and conspicuous requirement because it was not “clear.” First, according to the panel, the disclosure form was not clear because it contains language that a reasonable person would not understand. Specifically, the panel took issue with the following sentence in the disclosure:
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.
According to the panel, the beginning of the sentence “does not explain how the authorization is all-encompassing and how that would affect an applicant’s rights.” The second half of the sentence, following the semicolon, “lacks a subject and is incomplete. It suggests that there may be some limits on the all-encompassing nature of the authorization, but it does not identify what those limits might be.”
Second, the panel believed that the combining of federal and state disclosures rendered the document confusing. As a specific example, the panel referred to the disclosures directed to New York and Maine residents, which states: “New York and Maine
applicants or employees only: You have the right to inspect and receive a copy of any investigative consumer report requested by CheckSmart Financial, LLC by contacting the consumer reporting agency identified above directly.” This statement, argued the panel, might reasonably lead a reasonable reader to believe that only New York and Maine residents were entitled to contact the consumer reporting agency to get a copy of the report, which would be contrary to FCRA (as well as the equivalent California law.)
Employers – even those outside the 9th Circuit — should take the Gilberg decision to their background screening vendors immediately to be sure that their disclosure forms satisfy the Gilberg court’s concepts of “standalone” and “clear and conspicuous” and then have their own counsel do a similar analysis. Although the decision is not precedent except in the 9th Circuit, other federal courts outside the 9th Circuit have analyzed the standalone requirement in the same manner. Secondly, class actions alleging willful violations of the standalone requirement have resulted in very large settlements by employers, so employers should question whether they want to put themselves in that position unnecessarily.