Category Archives: Background Checks

When a Disclosure Form Must “Stand Alone”: Recent Cases Hold Companies Liable for Including Too Much on FCRA Disclosures

Let’s face it. The hiring process involves mounds of regulations, disclosures, authorizations, and then more disclosures. The last thing an employer – or applicant – wants to see is a higher stack of documents filled with legal jargon. Should employers then consolidate disclosures and authorizations to simplify the hiring process?

Not when doing a credit check pursuant to the Fair Credit Reporting Act (FCRA). Recent cases emphasize the importance of employers allowing disclosures to obtain background checks from consumer reporting agencies to “stand alone” from every other document.

The FCRA mandates that employers who seek to procure a consumer report must present “clear and conspicuous” disclosures that are contained in a document that consists solely of the disclosure. This is known as the “stand alone” requirement.

While the FCRA allows the disclosure form to also include an authorization – which is also required before procuring a report – Courts have recently cracked down on employers who include anything extraneous.

For instance, in Syed v. M-I, Ltd. Liab. Co., 853 F.3d 492 (9th Cir. 2017), the Ninth Circuit Court of Appeal held that the inclusion of a liability waiver in the same document as the FCRA disclosure violated the FCRA’s “stand alone” requirement.

The Ninth Circuit further held that violation of this technical requirement is enough of a “concrete harm” to allow the case to proceed in Federal Court where the plaintiff alleged he was confused about the excess language and would not have signed the disclosure otherwise.

In Poinsignon v. Imperva, Inc., No. 17-cv-05653-EMC, 2018 U.S. Dist. LEXIS 60161 (N.D. Cal. Apr. 9, 2018), a District Court recently held that a FCRA disclosure that included references to state law, a URL link to a privacy policy, and an acknowledgment of another document – the “Summary of Rights under FCRA” – violated the FCRA’s “stand alone” requirement.

The Court in Poinsignon underscored the importance of “[p]resenting the disclosure in a separate stand-alone document free from the clutter of other language” to call “consumers’ attention to their rights and to the significant of their authorization.”

And in Lagos v. Leland Stanford Junior Univ., No. 5:15-cv-04524-PSG, 2015 U.S. Dist. LEXIS 163119 (N.D. Cal. Dec. 4, 2015), a District Court held that inclusion of seven state law notices and a sentence stating, “I also understand that nothing herein shall be construed as an offer of employment or contract for services,” plausibly violated the FCRA’s “stand alone” requirement.

Against this backdrop, there has been a considerable uptick in FCRA litigation in recent years. In 2017, FCRA litigation increased over 9% from the prior year.

So far in 2018, FCRA related filings are on pace to increase further.

Employers have also been recent targets of FCRA class action lawsuits alleging violation of the FCRA’s “stand alone” requirement.

For example, on April 20, 2018, Petco Animal Supplies, Inc., asked a Federal Court in the Southern District of California to approve a class-wide settlement of a 2016 lawsuit based on allegations that its web based application contained a FCRA disclosure containing a broad authorization for “any person” to provide “any and all information” to the consumer reporting agency, in addition to information relating to the laws of seven different states. Petco agreed to pay $1.2 million to resolve the claims of approximately 37,000 individuals.

And on April 12, 2018, Frito-Lay, Inc., asked a Federal Court in the Northern District of California to approve a class-wide settlement of a 2017 lawsuit based on allegations that Frito-Lay violated the FCRA’s “stand alone” requirement by including additional language in its FCRA disclosure form including, among other things, a statement that “I have been given a standalone consumer notification that a report will be requested and used [.]” Frito-Lay agreed to a settlement of about $2.4 million to resolve the claims of roughly 38,000 class members.

2018 marks a new opportunity for employers to review and update their hiring forms to ward off FCRA lawsuits.

Quirky Question #264, Oregon Employers: Beware!

Question: I am an employer in Oregon, and I understand Oregon Governor Kate Brown signed a whole slew of bills into law on Monday which will directly impact Oregon employers. What do I need to know?

Answer→

Quirky Question #218, Minnesota Ban-The-Box

Question:

We are a private employer in the State of Minnesota and are expanding rapidly.  In years past, we have received hundreds, sometimes thousands, of applications for each position advertised.  In an effort to increase efficiency in the identification of qualified candidates, as well as in preparation for an anticipated round of hiring in the New Year, we plan to update our applications for employment.  We would like to incorporate a number of new questions, including whether the applicant has a criminal history.  Are we prohibited from including this question in our application? Answer→

Quirky Question # 191: Pre-Employment Background Checks for Temporary Employees

Question:

I read with interest your analysis of pre-employment background checks in Quirky Question # 189. I’ve got a slightly different inquiry touching on the same issue.

I’m a Human Resources Executive at a national retail company. During several parts of the year, we need to hire additional cashiers. For many years, we have successfully used a temporary staffing agency to fill these seasonal positions. The temporary workers are employed by the staffing agency, but work at our company.

We offer a store credit card, and instruct all cashiers (whether regular or temporary) to encourage customers to complete applications for the card while checking out their purchases. The credit card application requires detailed personal and confidential information. We have several practices, procedures and policies in place to protect our customers from identity theft. For example, we conduct pre-employment credit and criminal background checks on all of our regular employees, and assume that the temporary agency conducts similar background checks on their workers whom they place at our company.

Since the seasonal workers are technically employed by the staffing agency, does that eliminate (or reduce) our liability should it turn out that the worker steals a customer’s identity? Moreover, should we play any role in what background checks the staffing agency runs on the seasonal workers to reduce any liability we may have for negligent hiring of those workers? Answer→

Dorsey’s Analysis of Quirky Question #189, Are Pre-Employment Background Checks Discriminatory?

Question:

I am the Human Resources Director at a mid-size company, with employees in eight states.  We’ve recently read about the U.S. Equal Employment Opportunity Commission (“EEOC”) bringing suit against employers based on pre-employment background checks, as well as some states prohibiting pre-employment credit checks.  We certainly don’t want to create potential liability for ourselves based on our pre-employment screening, but feel that criminal and credit checks are a valuable part of our recruiting process.  We are beginning to feel that no matter how we proceed, we face potential liability in one way or another.  Do you have any advice? Answer→