The United States District Court for the Northern District of California recently dismissed a proposed class action alleging that LinkedIn was a Consumer Reporting Agency (“CSA”) under the Fair Credit Reporting Act (“FCRA”) and violated the law when it provided an online feature that allows businesses to check applicants’ references on the site without the applicants’ knowledge. Sweet v. LinkedIn Corp., 5:14-cv-04531-PSG (N.D. Cal. April 14, 2015). The Plaintiffs unsuccessfully argued that the site’s “Reference Search” feature produced “Consumer Reports” (“CR”) under the law.

The four named Plaintiffs each utilized LinkedIn to apply and interview for jobs. They argue that they were denied employment opportunities after the potential employers connected with them on LinkedIn. The Plaintiffs allege that LinkedIn’s publication of Reference Searches to prospective employers violated the FCRA.

The FCRA’s purpose is to protect consumers from the transmission of inaccurate information. The law requires companies that operate as CSAs 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). This edict applies to CRs created by the CSAs that contain information about a consumer regarding his or her “credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, that will be used in whole or in part as establishing the consumer’s eligibility” for “employment purposes.” 15 U.S.C. §1681a(d)(1).

LinkedIn’s “Reference Search” feature creates a list of individuals who have worked for the same company during the same period of time as the person about whom the search is conducted. Employers can then contact these references through the site to obtain feedback about the applicant. The Plaintiffs’ argued that the feature creates CRs and that the company violated the FCRA by not instituting the required procedures and complying with its notice and consent requirements. The Court held that the feature is excluded from the definition of “consumer report” because the applicants voluntarily provide the information with the intention of LinkedIn publishing it.

Plaintiffs also argued that the Reference Searches revealed information about the potential references which could provide the employer with information about applicants’ character, general reputation and mode of living. Specifically, the search shows that the references have jobs in certain industries, live in certain locations, and have connections to other well-respected or notorious individuals (like Bernie Madoff). Therefore, the information about the references provides employers with additional information about the applicants. The Court rejected this argument stating that the Reference Search does not actually show that the applicant knows or associates with the recommended references, therefore the correlation between the references’ information and the applicants’ information is not necessarily there.

The Court also found that the Reference Searches are not used or intended to be used for “employment purposes” under the FCRA. Employers do not use the Reference Searches themselves to make employment decisions, but instead, use them to locate people who may be able to provide information that could help employers evaluate the applicants.

The Court also found that LinkedIn is not a CSA, therefore it could not create a CR. Under the FCRA, a CSA gathers and/or evaluates information to make CRs to third parties in exchange for a fee. LinkenIn, however, gathers the information to carry out consumers’ information-sharing objectives.

Although this is an indication that Courts are not willing to expand the FCRA’s application to social media, the Court’s ruling is not completely determinative of the issue. The Plaintiffs were granted leave to file an Amended Complaint later this month. We will continue to monitor this developing issue.

What does this ruling mean for employers? If social media sites are categorized as CSAs producing CRs under the FCRA, the employers who search these sites are likewise subject the FCRA’s pre- and post-screening notice, consent and disclosure requirements. The case sheds additional light on the use of social media during the hiring process and its potential pitfalls. Employers should still be cognizant of EEO laws when using social media during the hiring process.