Finding that LinkedIn’s “Reference Search” function was not subject to the Fair Credit Reporting Act (FCRA), a Northern California federal district court dismissed a putative class action filed on behalf of job applicants who allegedly lost job opportunities as a result of information learned by employers through LinkedIn.

In Sweet v. LinkedIn Corporation, the plaintiff was initially informed that she was to be hired by a hospitality employer, but later learned that the employer changed its mind after checking the plaintiff’s references. The plaintiff believed that the employer learned of these references through LinkedIn’s “Reference Search” function, which allows paid subscribers to obtain information about an applicant’s prior employers and other LinkedIn members who worked at the same company at the same time as an applicant. LinkedIn marketed the “Reference Search” function as a way for employers to obtain “trusted references,” to “get the real story on any candidate,” and to find references “who can give real, honest feedback” on job candidates. Plaintiff, representing a class of purportedly similar individuals, alleged that LinkedIn violated her rights under the FCRA by furnishing Reference Search results for employment purposes without complying with the terms of the FCRA. The FCRA generally imposes procedural and substantive obligations on “consumer reporting agencies” to ensure that information gathered in “consumer reports” is accurate.

The federal district court held that the LinkedIn’s Reference Search was not subject to the FCRA for several reasons. First, the information contained in the Reference Search came solely from LinkedIn’s transactions with its customers, rather than through a third party resource. A report containing information relating solely to transactions between a consumer and the person making the report is excluded from the FCRA’s definition of “consumer report.” Second, the court determined that LinkedIn is not a “consumer reporting agency,” i.e., an agency that regularly engaged in assembling consumer information for third parties, but rather is a conduit for members to carry out their objectives of voluntarily sharing their information. Third, the court also found that the information obtained from the searches — which included information about the references rather than the plaintiffs — did not bear on the plaintiffs’ character, general reputation or mode of living. And finally, the court held that the Reference Search results are not used for employment purposes, but rather provide information from which the employer can obtain employment-related information regarding job candidates. Accordingly, the court determined that the plaintiffs failed to state a cause of action against LinkedIn under the FCRA and dismissed the lawsuit.

Notwithstanding the outcome in Sweet, the decision is a reminder that evolving methods of obtaining reference and background information on candidates may implicate the FCRA and similar state laws regarding background checks.