Last week, Magistrate Judge Paul S. Grewal issued an order for the Northern District of California granting LinkedIn Corporation’s (“LinkedIn”) Motion to Dismiss a proposed class action alleging that its “Reference Searches” – which enable employers to find people with whom a job applicant may have worked previously – violated the Fair Credit Reporting Act (“FCRA”). 

Background  

The FCRA, 15 U.S.C. § 1681 et seq., is intended to protect consumers from having inaccurate information transmitted about them.  To achieve that purpose, it requires consumer reporting agencies to “adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy and proper utilization of such information.”  15 U.S.C. § 1681(b).

Sweet v. LinkedIn 

Plaintiff consumers alleged LinkedIn violated their rights under the FCRA by furnishing Reference Search results for employment purposes.  The lead plaintiff, Sweet, claimed that her job offer had been rescinded after the employer reviewed her references through the online feature. 

In dismissing the complaint, Judge Grewal offered several key reasons for his conclusion that the Reference Searches did not fall within the FCRA’s definition of a “consumer report”:  

  1. The information “came solely from LinkedIn’s transactions or experiences with these same consumers” and therefore fell within the FCRA’s exception for “any ‘report containing information solely as to transactions or experiences between the consumer and the person making the report.’”Case No. 5:14-cv-04531-PSG, Dkt. No. 33 at 9 (N.D. Cal. April 14, 2015) (quoting 15 U.S.C. § 1681a(d)(2)(A)(i)). 
  2. Plaintiff’s allegations do not raise a plausible inference that LinkedIn acts as a “consumer reporting agency” when it publishes these histories.To qualify as a “consumer report,” the “communication must be made ‘by a consumer report agency.’”Id. at 12 (citing 15 U.S.C. § 1681a(d)(1)). Here, the Reference Search subjects “voluntarily provided their names and employment histories to LinkedIn for the purpose of publication.”Id. at 13.Accordingly, the facts support the inference that LinkedIn gathers the information “to carry out consumers’ information-sharing objectives,” rather than “to make consumer reports.”Id.  
  3. Plaintiffs fail “to state a claim that the list of names and other information included in the Reference Search bears on the character, general reputation, mode of living and other relevant characteristics of the consumers who are the subjects of these searches.”Id. at 14. The court emphasized that plaintiffs had not alleged that the search results indicated that thesubjects actually knew or were associated with the listed references.Rather, the complaint asserted that the results list individuals who once had a common employer with the subject of the search and are in the same network as the person who initiated the search.The Reference Search results would therefore communicate whether the searcher – not the search subject – is well-connected in a certain industry or associated with a notorious individual.  
  4. The complaint does “not state a claim that the Reference Search results are used or intended to be used as a factor in determining whether the subjects of the search are eligible for employment,” as required to meet the definition of a consumer report.Id. at 17.According to the court, LinkedIn markets and expects the Reference Search results to be used as means for potential employers to locate individuals “who can provide reliable feedback about job candidates and does not market the results themselves as a source of reliable feedback about job candidates.”Id. at 18 (emphasis added).The allegations failed to support a reasonable inference that LinkedIn expected the search results to be used, or that the potential employers actually used them, to determine consumers’ employment eligibility.

The court further noted that the definition of consumer report “does not encompass every tool or reference that employers might use to [assess] job candidates.”  Id. at 19.  Accordingly, the allegation that the Reference Search results “can contribute to hiring decisions made by employers” was not enough to show they “are used or intended to be used for employment purposes.”  Id. at 18-19.    

Notably, however, Judge Grewal left the door open for plaintiffs to try again, granting them leave to amend the complaint until May 19, 2015. 

The court’s decision is an important step in helping to shape the contours of the FCRA and its potential applicability to social networking and related sites, particularly as employers’ use of social media to conduct diligence on potential applicants continues to increase.