In a decision that could have nationwide implications for how employers conduct background checks, the 9th Circuit Court of Appeals recently held in Gilberg v. California Check Cashing Stores, LLC that a background check disclosure form violates the federal Fair Credit Reporting Act (FCRA) if it includes any extraneous information relating to any state background check disclosure requirements. The FCRA and the laws of several states require an employer to provide certain written disclosures to applicants and employees before obtaining a background check on them from a third party. It is common for employers in states that also have their own disclosure requirements to combine the FCRA and state disclosures into one form. However, as the 9th Circuit noted in its decision, which applies to the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington, the FCRA requires that its disclosure be “clear and conspicuous” and standalone in “a document that consists solely of the [FCRA] disclosure.” (The one exception is that the FCRA expressly allows the individual’s written authorization to conduct the background check to be combined with the disclosure into one document.)

In Gilberg, the plaintiff alleged that her former employer’s disclosure form violated the FCRA because it contained information relating to both the FCRA and the background check laws of several states, including California. Finding the FCRA’s standalone requirement to be clear and unambiguous, the 9th Circuit held that the inclusion of information relating to various state disclosure requirements violated the FCRA’s standalone requirement because the form did not consist “solely” of the FCRA disclosure. The Court also found that the employer’s form violated the FCRA in that it was not clear because the state disclosure language could mislead a person about his or her rights under the FCRA. The 9th Circuit also held that the employer’s form violated the California Investigative Consumer Reporting Agencies Act (ICRAA) because that law’s disclosure requirements are identical to the FCRA’s.

In light of the Gilberg decision, employers in the 9th Circuit that obtain background checks from vendors should ensure that their FCRA disclosure form satisfies the FCRA’s standalone and clear and conspicuous requirements as outlined in the decision. They should also ensure that they use a separate form to comply with any state-specific disclosure requirements. As the 9th Circuit’s interpretation of the FCRA appears sound, employers outside of the 9th Circuit that use vendors to obtain background checks and currently use one form that combines the FCRA with any state-specific disclosures should consider doing the same. The potential liability for violating the FCRA can be substantial, so plaintiffs’ attorneys will likely try to persuade other federal courts to follow Gilberg.