dead men tell no tales background checks

“Dead Men Tell No Tales” & Background Checks

It should be no surprise by now that a certain circuit (I’m looking at you Ninth Circuit) makes its own rules. So much so, the Supreme Court recently had to inform them of the shocking truth that dead judges can’t write opinions. If you are seeing the quote “…federal judges are appointed for life, not for eternity” around a lot lately, it’s because the Supreme Court vacated a Ninth Circuit opinion on the Equal Pay Act that was authored by Judge Stephen Reinhardt and issued 11 days after his death. As a result, employers in the Ninth Circuit may continue to consider prior salary as a legitimate “factor other than sex” in determining compensation.

Though that decision was vacated, a recent decision by the Ninth Circuit relating to background checks has some cautions that employers outside of the Ninth Circuit may want to implement. (The Ninth Circuit covers: Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington.) The Fair Credit Reporting Act (FCRA) protects consumer privacy rights and regulates the collection, disclosure and use of consumer information. Under the FCRA, employers are required to provide all employees/applicants disclosures related to the use of their background check and/or credit information. To make things easier, many employers rely on a single multistate form that provides the FCRA disclosure as well as various state-specific disclosures. For example, employers with a location in multiple states, including California, may include the FCRA disclosure and then a separate paragraph that reads “For California Applicants Only”.

In January of this year, the Ninth Circuit looked at these multiple disclosure documents under the FCRA and California’s Investigative Consumer Reporting Agencies Act (ICRAA) and created its own strict interpretation of the FCRA’s “stand-alone document” requirement. The case is Gilberg v. California Check Cashing Stores LLC. In that case, Gilberg applied for a position with CheckSmart and received a multistate FCRA disclosure and authorization form. The form contained the FCRA disclosure and a number of state-mandated disclosures that applied to individuals from various states. After leaving CheckSmart, Gilberg filed a class action against CheckSmart for violating the FCRA and ICRAA. The Ninth Circuit found that CheckSmart not only violated the FCRA and ICRAA’s “stand-alone document” but also the “clear and conspicuous” requirement. The court determined that the disclosure violated the FCRA and ICRAA’s “stand-alone document” requirements because the disclosure form referred “also to rights under state laws inapplicable to Gilberg and to extraneous documents that are not part of the FCRA-mandated disclosure” such as a “Notice Regarding Background Investigation” and a “Summary of Your Rights Under the Fair Credit Reporting Act.” Essentially under this holding, “stand-alone document” really mean ALONE!

Now that you have the background, here are a few things to consider to ensure that your background check disclosure forms comply with this new interpretation of the stand-alone document rule:

  1. Make sure the FCRA disclosure form that you provide to employees and applicants consists solely of the FCRA disclosure.
    The Ninth Circuit found that the “Summary of Your Rights Under the Fair Credit Reporting Act” was “extraneous information” and “does not further FCRA’s purpose.”Additionally, make sure to exclude liability waivers and other language that may seek to limit the impact of the FCRA (or the ICRAA in California). Other employment related acknowledgements and acknowledgments related to background checks should be in a separate document.
  2. Signature blocks may be included on the same form.
    This is an express exception to the FCRA’s stand-alone document rule that an applicant/employee may “authorize in writing” the procurement of the report in the same document as the FCRA disclosure.
  3. The disclosure document(s) may be included as part of a packet of information. 
  4. The disclosure should be clear and easy to understand.
  5. Make sure the disclosure is conspicuous.
    Use large font and easy to read formatting. The Ninth Circuit found that the provision at issue in the Gilberg case was conspicuous because CheckSmart had “capitalized, bolded and underlined the headings for each section of the disclosure and labeled the form so an applicant could see what she was signing.”
  6. Review agency forms.
    If you use FCRA disclosure forms that are provided to you by a consumer reporting agency, you should carefully review them to ensure that they are in compliance with the stand-alone document and clear and conspicuous disclosure rules.

Though this strict reading of the stand-alone document rule only applies to Ninth Circuit employers for now, taking these conservative steps may protect your company from a lawsuit in the future. For help with background checks and reviewing your current FCRA disclosures contact your local Labor & Employment attorney.