United States: Background Check Disclosures With State Law Information Are Illegal, Ninth Circuit Declares In Class Action Case

Last Updated: February 7 2019
Article by Todd Lebowitz

Check your background check disclosure forms. Now.

The Ninth Circuit has now declared that background check disclosure forms that include state law disclosures are illegal. Gilberg v. California Check Cashing Stores, LLC, Case No. 17-16263 (9th Cir. Jan. 29, 2019).

Under the Fair Credit Report Act (FCRA), a pre-employment disclosure form for background checks must be in a "stand alone" document. Courts have generally interpreted that rule to mean that disclosure forms cannot include extraneous information, like a waiver, and cannot be combined with a job application. It has been a common practice, however, to include federal and state disclosures in one document. In the Gilberg case, the employer combined its federal FCRA form with one containing the similar disclosures under California law. The plaintiff, who had successfully applied for work and had signed the combined form, brought suit in district court in California on her own behalf and on behalf of a proposed class of others who had signed the same form.

According to this new ruling from the Ninth Circuit, federal and state disclosures can no longer be combined.

That means more paper.

The court also invalidated the FCRA disclosure at issue for a second reason. The FCRA requires a disclosure to be "clear and conspicuous." The court ruled that the company's form was not "clear" because its text included a misplaced semi-colon. The grammarians on the bench knew that a semi-colon, used properly, separates two independent clauses in one sentence. The court therefore read the text after the semi-colon as if it were an independent clause, finding that the text after the semi-colon lacked a subject and was therefore a confusing sentence fragment.

This is an approach that my late 7th grade English teacher, Mrs. Lombroia, would have approved on a grammar quiz. But real life is not a grammar quiz, and most people are not grammarians. The court ruled that the misplaced semi-colon rendered the sentence — and therefore the entire document — "unclear."

Here is the offending sentence:

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.

Without the semi-colon, the sentence makes sense. The court's approach is technical and harsh. But in the Ninth Circuit, it's now the law.

Here is the disclosure form that the Court ruled to be illegal.

The only winners in this decision are the paper and logging industries and seventh grade English teachers. The plaintiffs' bar is happy too.

The losers here include every business with imperfect background check disclosure forms.

Check your forms and update them. Proofread them. Separate federal and state background check disclosures. Do not rely on your background check provider to get it right if you are using their forms. The FCRA allows a statement of consent on the "stand alone" disclosure form, but that's the only exception recognized in the federal statute.

The FCRA allows for statutory penalties of $100 to $1,000 per violation, plus attorneys' fees. While the Supreme Court held in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (we blogged that decision here) that there must be an injury before someone can sue over a technical violation of the FCRA, it is an open question as to what kind of injury is sufficient. Background check class actions are a potential windfall for enterprising plaintiffs' lawyers, and many multi-million-dollar settlements have been publicly reported.

It is unclear whether other Courts of Appeal will adopt the same strict reading of the text; but employers in all states should take notice and adapt their forms to ensure they are compliant with this strict interpretation of the law.

(Note the proper use of semi-colon. Thank you, Mrs. Lombroia.)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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