Why it matters

Taking a hard line on the standalone document requirement of the Fair Credit Reporting Act (FCRA), the U.S. Court of Appeals, Ninth Circuit, held that the inclusion of any extraneous information relating to various state disclosure requirements violates the federal statute. Desiree Gilberg filed a putative class action against California Check Cashing Stores, alleging that the “Disclosure Regarding Background Investigation” form the company had her sign violated the federal law because it contained not only the mandated FCRA disclosure but additional disclosures from seven other states as well. A district court granted the employer’s motion for summary judgment, finding that it complied with both state and federal statutes. But the Ninth Circuit reversed. The FCRA means what is says, the panel wrote, holding that a prospective employer violates the federal statute’s standalone document requirement by including extraneous information relating to various state disclosure requirements in that disclosure. Not only did California Check Cashing violate the FCRA requirement, but the form of its disclosure also ran afoul of California’s Investigative Consumer Reporting Agencies Act (ICRAA) standalone document requirement, the court added. In light of the Ninth Circuit’s opinion, employers should reread their disclosure forms to ensure compliance with both the FCRA and state law to avoid a similar action.

Detailed discussion

Pursuant to 15 U.S.C. § 1681b(b)(2)(A), the Fair Credit Reporting Act (FCRA) requires employers who obtain a consumer report on a job applicant to provide the applicant with a “clear and conspicuous disclosure” that they may obtain such a report “in a document that consists solely of the disclosure” before procuring the report.

In the process of applying for employment with CheckSmart Financial, Desiree Gilberg completed a three-page form containing an employment application, a math screening and an employment history verification. She later signed a separate form, titled “Disclosure Regarding Background Investigation,” which included the FCRA disclosure as well as mandated state disclosures for California, Maine, Minnesota, New York, Oklahoma, Oregon and Washington.

CheckSmart hired Gilberg, who worked for the company five months before voluntarily leaving her employment. She then filed a putative class action against the company alleging that it failed to make proper disclosures as required by both the FCRA and California’s Investigative Consumer Reporting Agencies Act (ICRAA).

The district court granted the employer’s motion for summary judgment on both claims, ruling that CheckSmart’s disclosure form complied with the FCRA and ICRAA. Gilberg appealed to the U.S. Court of Appeals, Ninth Circuit.

Relying on its 2017 decision in Syed v. M-I, LLC, the federal appellate panel reversed. In Syed, the Ninth Circuit analyzed the FCRA’s standalone document requirement and held that a prospective employer violated the statute when it included a liability waiver in the same document as the mandated disclosure. The statute means what it says, the court held: that the required disclosure must be in a document that “consist[s] ‘solely’ of the disclosure.”

CheckSmart attempted to distinguish its disclosure because the additional information consisted of other, state-mandated disclosure information, which it argued furthered, rather than undermined, the FCRA’s purpose.

“We disagree,” the panel wrote. “Syed’s holding and statutory analysis were not limited to liability waivers; Syed considered the standalone requirement with regard to any surplusage. Syed grounded its analysis of the liability waiver in its statutory analysis of the word ‘solely,’ noting that FCRA should not be read to have implied exceptions, especially when the exception—in that case, a liability waiver—was contrary to FCRA’s purpose. Syed also cautioned ‘against finding additional, implied exceptions’ simply because Congress had created one exception. Consistent with Syed, we decline CheckSmart’s invitation to create an implied exception here.”

Purpose does not override plain meaning, the court said, rejecting CheckSmart’s argument that its disclosure form was consistent with the intent of the FCRA. Further, the employer failed to explain how the surplus language comported with FCRA’s purpose, as the disclosure referred not only to rights under the FCRA and ICRAA applicable to Gilberg, but also to rights under various other state laws inapplicable to her.

“Because the presence of this extraneous information is as likely to confuse as it is to inform, it does not further FCRA’s purpose,” the court said.

Syed holds that the standalone requirement forecloses implicit exceptions,” the Ninth Circuit wrote. “The statute’s one express exception does not apply here, and CheckSmart’s disclosure contains extraneous and irrelevant information beyond what FCRA itself requires. The disclosure therefore violates FCRA’s standalone document requirement. Even if congressional purpose were relevant, much of the surplusage in CheckSmart’s disclosure form does not effectuate the purposes of FCRA. The district court therefore erred in concluding that CheckSmart’s disclosure form satisfies FCRA’s standalone document requirement.”

The panel also held that CheckSmart’s disclosure form was not “clear and conspicuous” under either the FCRA or the ICRAA. Although the court determined the form was “conspicuous” (despite frowning on the size of the font used), it was not “clear” because it contained language a reasonable person would not understand and would confuse a reasonable reader because it combined federal and state disclosures.

For example, the disclosure stated: “The scope of this notice and authorization is all-encompassing; however, allowing CheckSmart Financial, LLC to obtain from any outside organization all manner of consumer reports and investigative consumer reports now and, if you are hired, throughout the course of your employment to the extent permitted by law.”

The beginning of the sentence did not explain how the authorization was all-encompassing or how that would affect an applicant’s rights, the court said, while the second half of the sentence lacked a subject and was incomplete.

As “CheckSmart’s disclosure form was not both clear and conspicuous, the district erred in granting CheckSmart’s motion for summary judgment with regard to the FCRA and ICRAA ‘clear and conspicuous’ requirements,” the panel wrote.

To read the opinion in Gilberg v. California Check Cashing Stores, LLC, click here.