Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On April 15, 2019, a California Court of Appeal affirmed summary judgment for the employer in an action alleging class-wide violations of the hyper-technical provisions of the federal Fair Credit Reporting Act (FCRA).1 Following just shortly after the Ninth Circuit’s pro-employee opinion in a similar case, Gilberg v. California Check Cashing Stores, the court’s opinion is a welcome development for embattled employers in California.2
The Court of Appeal Decision
The plaintiffs’ class action suit alleged two purported FCRA violations against the employer: (1) that its background check disclosures to job applicants did not comply with the FCRA’s “standalone” disclosure requirement; and (2) that it rejected certain applicants based on information in their consumer reports without first providing the requisite pre-adverse action notice. The employer moved for summary judgment following an order certifying the case as a class action.3 The trial court granted summary judgment for the employer on both claims, concluding that any alleged violation of the FCRA’s provisions was not “willful.”4 The plaintiffs appealed the trial court’s ruling, but the Court of Appeal affirmed the trial court’s judgment.
The Court of Appeal held that the employer’s disclosure did not constitute a willful violation of the standalone disclosure requirement. The court rejected the plaintiffs’ argument that the FCRA permits only a “10-word disclosure” because no authoritative guidance by the Ninth Circuit, the Federal Trade Commission, or the trial courts existed at the time of the alleged violations (i.e., when the employer presented the disclosures to the plaintiffs). The court distinguished the Ninth Circuit’s recent opinions in Syed v. M-I5 and Gilberg because they were decided after the employer presented the disclosures to the plaintiffs. Additionally, neither case considered alleged “extraneous” information similar to that in the employer’s disclosure forms. In sum, no authorities had existed to warn the employer away from using its forms. Thus, the employer’s alleged violations could not be willful as a matter of law.
Pre-Adverse Action Notice
The plaintiffs argued that, rather than provide the required pre-adverse action notice to potentially disqualified job applicants, the letter issued by the background check company for the employer prematurely communicated a final decision by the employer. The Court of Appeal disagreed. The court held that the employer took a reasonable position in its pre-adverse action letters, pointing to the conditional nature of the letter and the time provided before any final action in fact would be taken. It noted that an employer can fully intend to carry out the adverse action absent a dispute by the consumer.
While this Court of Appeal decision represents a victory for employers, the law in this area remains dynamic. Employers should still take care to arrange for a privileged review of their background check consent forms and adverse action process. A thorough review of these forms and processes may help avoid the types of claims raised in cases that take issue with an employer’s inclusion of text beyond the minimum necessary for FCRA disclosures.6 Employers should also continue to be mindful of their obligations under state and local ban the box laws, which intersect with the FCRA’s required processes.7
1 Culberson v. Walt Disney Parks & Resorts, 2019 WL 1594026 (Cal. Ct. App. Apr. 15, 2019).
2 See Rod M. Fliegel, The Ninth Circuit Adopts an Expansive Reading of the FCRA’s Provision Governing Background Check Disclosures, Littler ASAP (Jan. 29, 2019).
3 See Rod M. Fliegel, California Court Certifies FCRA Class of Over 40,000 Applicants, Littler Insight (July 17, 2017).
4 See Rod M. Fliegel and Allen P. Lohse, Employers Prevail in FCRA Class Actions, Littler Insight (Feb. 28, 2018).
5 See Jennifer Mora and Rod Fliegel, Ninth Circuit is the First Appellate Court to Rule on “Extraneous Text” in a FCRA Background Check Disclosure, Littler Insight (Jan. 25, 2017).
6 See Rod Fliegel and Jennifer Mora, Weathering the Sea Change in Fair Credit Reporting Act Litigation in 2014, Littler Insight (Jan. 6, 2014); Rod Fliegel, Jennifer Mora and William Simmons, The Swelling Tide of Fair Credit Reporting Act (FCRA) Class Actions: Practical Risk-Mitigating Measures for Employers, Littler Report (Aug. 1, 2014).
7 See, e.g., Rod M. Fliegel & Molly M. Shah, Ringing in 2018 with New Ban-the-Box Laws, Littler Insight (Jan. 8, 2018); William J. Simmons, Uzo N. Nwonwu & Jason N.W. Plowman, Kansas City, Missouri, Enacts “Ban-the-Box-Plus” Ordinance, Littler ASAP (Feb. 6, 2018).