State Law Information + Unclear Wording = FCRA Violations
Time 4 Minute Read

If your background check forms include too much information about rights under state law, or even grammatical errors, you might be in trouble according to the Ninth Circuit.  In Gilberg v. California Check Cashing Stores, the appeals court recently ruled against an employer for using background check disclosure forms that violate both the federal Fair Credit Reporting Act (FCRA), and California’s Investigative Consumer Reporting Agencies Act (ICRAA).

Both FCRA and ICRAA require an employer to make a “clear and conspicuous disclosure” to an individual that a consumer report will be obtained for employment purposes “in a document that consists solely of the disclosure.”  The Gilberg court refers to these as the “clear and conspicuous requirement” and the “standalone document requirement,” and considered these requirements to be identical under both FCRA and ICRAA.

When Gilberg applied for a position with CheckSmart, she received a one-page “Disclosure Regarding Background Investigation,” which included: a disclosure about consumer reports and investigative consumer reports for employment purposes, as required by FCRA and ICRAA; additional disclosures regarding rights under state laws in New York, Maine, Oregon and Washington; an “Acknowledgement and Authorization” for the applicant to sign; and below that, information for California, Minnesota, Oklahoma, and New York applicants or employees.

Gilberg read and signed the disclosure document, CheckSmart ran her background report and hired her, and she worked for five months before voluntarily resigning and then bringing this class action lawsuit.  CheckSmart prevailed in the district court, which held its disclosure form satisfied both FCRA and ICRAA.

On appeal, the Ninth Circuit reversed and ruled in favor of Gilberg on two distinct grounds.

First, CheckSmart’s disclosure violates the standalone document requirement because it includes information about rights under state laws.  The Ninth Circuit has previously held, in Syed v. M-I, LLC, that an employer’s inclusion of a liability waiver in the disclosure violates the standalone requirement.  CheckSmart argued its inclusion of state law information should not be treated the same: unlike a liability waiver, which requires an individual to forego rights, state law information provides more information about rights the individual has related to their background check.  The court disagreed, reasoning that Syed’s holding and analysis was not limited to liability waivers but extends to “any surplusage” in the disclosure form.  Thus, the court “now hold[s] that a prospective employer violates [the] standalone document requirement by including extraneous information relating to various state disclosure requirements in that disclosure.”

Second, CheckSmart’s form also violates the “clear and conspicuous” requirement.  Although the form was “conspicuous” – the court notes the headings were capitalized, bolded, and underlined and the form was well-labeled – it was not “clear.”  To meet the “clarity” prong of the requirement, the form must be “reasonably understandable.”  The court held CheckSmart’s form was not reasonably understandable in two ways:

  1. It combined federal and state disclosures, which might confuse the reader. For example, the information about New York and Maine applicants being able to obtain a copy of an investigative consumer report by contacting the reporting agency might mislead other applicants into thinking they are not entitled to obtain a copy of the report.
  2. It contained language a reasonable person would not understand. The court cites to a particular paragraph of the form, which states the “scope of this notice and authorization is all-encompassing” followed by a semi-colon, and a second half of the sentence that “lacks a subject and is incomplete” and suggests there may be limits to the authorization without explaining what those limits might be.

In light of the Ninth Circuit’s ruling in Gilberg, employers should take this opportunity to review any background check disclosure and authorization documents to ensure they comply with both the “clear and conspicuous” and “standalone document” requirements of FCRA, ICRAA, and other applicable laws.

  • Partner

    Kevin is co-chair of the firm’s labor and employment team and co-chair of the firm’s Retail and Consumer Products Industry practice group. He has a national practice that focuses on complex employment litigation, employment ...


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