Ninth Circuit Provides Important Guidance on FCRA Disclosures and Authorizations

In an important decision for employers that conduct background checks on new hires, on April 24, 2020, the United States Court of Appeals for the Ninth Circuit affirmed a summary judgment in favor of the employer in the case of Leonard Luna v. Hansen and Adkins Auto Transport, Inc.  The Court of Appeals held that an employer does not violate the Fair Credit Reporting Act (FCRA) (i) by providing a job applicant the disclosure at the same time as other employment materials; or (ii) by failing to place the authorization in a standalone document.

At issue in the case was the FCRA required disclosure and authorization that employers must provide job applicants when conducting a background check through a third-party background screening company.  The Plaintiff filed a class action alleging that the employer’s hiring process violated the FCRA’s disclosure and authorization requirements by presenting the disclosure together with other employment application materials.  The FCRA requires that employers provide a “clear and conspicuous disclosure,” in writing, in a document “that consists solely of the disclosure” that a background check may be conducted and that the applicant authorizes such background check in writing.  The FCRA specifically states that the authorization may be combined with the disclosure. (FCRA § 604(b)(2)(A)(i) and (ii)).

The Court of Appeals made two important points relevant to the legal requirements placed on employers when conducting FCRA-regulated background checks.

One:  The plaintiff in the case took issue with the employer’s practice of providing employees with the disclosure at the same time as, but as a separate document from, other employment documents.  The Court of Appeals held that while Section 604(b)(2)(A)(i) of the FCRA requires that a disclosure be in “a document that consists solely of the disclosure,” no authority suggests that a disclosure must be distinct in time from other documents, as well.  Thus, an employer does not violate the FCRA by presenting a standalone FCRA disclosure form contemporaneously with other employment application materials.

Two:  The Court of Appeals also addressed the plaintiff’s argument that the employer violated the FCRA by failing to put its authorization in a standalone document.  The employer had included authorization language “at the end of the [a]pplication, and included other notices, waivers, and agreements unrelated to acquiring the consumer report.”  The Court noted that while Section 604(b)(2)(A)(i) of the FCRA requires that the disclosure be in a standalone document, Section 604(b)(2)(A)(ii) of the FCRA only requires that the authorization be “in writing,” without specifying its format.

If you have any questions about any aspect of this ruling or any other issue related to pre-employment background checks, please contact a member of AGG’s Background Screening Team.