On January 29, 2019, the U.S. Court of Appeals for the Ninth
Circuit in Gilberg v. California Check Cashing
Stores, LLC instructed employers about the importance of
complying with background check disclosure requirements found in the Fair
Credit Reporting Act (FCRA).
Pursuant to the federal statute, employers who want to
obtain a consumer report (commonly referred to as a background check report) on
a job candidate must provide to the candidate a “clear and conspicuous
disclosure” about the report in a document that consists “solely of the
disclosure.” 15 U.S.C. § 1681b(b)(2)(A).
But when Desiree Gilberg applied for a job with CheckSmart
Financial, she received something different. First Gilberg completed a
three-page form containing an employment application, a math screening and an
employment history verification. She then signed a separate form entitled,
“Disclosure Regarding Background Investigation.”
The one-page form included the required FCRA disclosure as
well as mandated state disclosures for California, Maine, Minnesota, New York,
Oklahoma, Oregon and Washington.
Gilberg worked for CheckSmart for five months before
voluntarily leaving the job. She then filed a putative class action against the
company, alleging that it failed to make proper disclosures as set forth in
both the FCRA and California’s Investigative Consumer Reporting Agencies Act
(ICRAA).
A district court sided with the employer and dismissed the
case. The judge agreed with CheckSmart that its disclosure form complied with
both statutes. Gilberg appealed to the Ninth Circuit. She argued that the
standalone requirement didn’t permit the combination of state and federal
disclosures as CheckSmart had tried.
Considering the issue, the Ninth Circuit recalled a 2017
decision in Syed v. M-I, LLC. In that case, which also involved the standalone
requirement, the federal appellate panel held that a prospective employer
violated the FCRA when it included a liability waiver in the same document as
the mandated disclosure. The statute means what it says, the court emphasized:
the required disclosure must be in a document that “consist[s] ‘solely’ of the
disclosure.”
In an effort to distinguish its disclosure from that in the
Syed case, CheckSmart told the court that the additional information in its
form actually furthered the FCRA’s purpose.
“We disagree,” the court 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.”
Plain meaning trumps purpose, the Ninth Circuit said,
rejecting the employer’s contention that its disclosure form was consistent
with the intent of the FCRA. Since the surplus language included disclosures
required by various state laws that were inapplicable to Gilberg, the court was
unable to understand how the CheckSmart form comported with the purpose of the
federal statute.
“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 declared.
“Syed holds that the standalone requirement forecloses
implicit exceptions,” the panel 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 the FCRA.”
In addition to ruling that the district court erred in
concluding that the employer’s disclosure form satisfied the FCRA’s standalone
document requirement, the Ninth Circuit also held that CheckSmart’s disclosure
form was not “clear and conspicuous” under either FCRA or ICRAA.
The court grudgingly found the form to be “conspicuous”
(despite characterizing the font as “inadvisably” small and cramped) but held
it was not “clear.” The disclosure contained language a reasonable person would
not understand, the court said, and its content would confuse a reader with the
combination of federal and state disclosures.
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. The Ninth Circuit reversed dismissal of
Gilberg’s complaint and remanded the case to the California district court. (As
of this writing, there is a petition for rehearing and rehearing en banc
pending before the 9th Circuit.)
For employers, the Ninth Circuit opinion could not be more
clear: ensure that the FCRA disclosure form provided to job candidates contains
no extraneous or surplus language. The decision also provides an important
reminder about keeping disclosures forms clear and conspicuous in order to
comply with both federal and state laws.
Pursuant to the federal statute, employers who want to
obtain a consumer report (commonly referred to as a background check report) on
a job candidate must provide to the candidate a “clear and conspicuous
disclosure” about the report in a document that consists “solely of the
disclosure.” 15 U.S.C. § 1681b(b)(2)(A).
But when Desiree Gilberg applied for a job with CheckSmart
Financial, she received something different. First Gilberg completed a
three-page form containing an employment application, a math screening and an
employment history verification. She then signed a separate form entitled,
“Disclosure Regarding Background Investigation.”
The one-page form included the required FCRA disclosure as
well as mandated state disclosures for California, Maine, Minnesota, New York,
Oklahoma, Oregon and Washington.
Gilberg worked for CheckSmart for five months before
voluntarily leaving the job. She then filed a putative class action against the
company, alleging that it failed to make proper disclosures as set forth in
both the FCRA and California’s Investigative Consumer Reporting Agencies Act
(ICRAA).
A district court sided with the employer and dismissed the
case. The judge agreed with CheckSmart that its disclosure form complied with
both statutes. Gilberg appealed to the Ninth Circuit. She argued that the
standalone requirement didn’t permit the combination of state and federal
disclosures as CheckSmart had tried.
Considering the issue, the Ninth Circuit recalled a 2017
decision in Syed v. M-I, LLC. In
that case, which also involved the standalone requirement, the federal
appellate panel held that a prospective employer violated the FCRA when it
included a liability waiver in the same document as the mandated disclosure.
The statute means what it says, the court emphasized: the required disclosure
must be in a document that “consist[s] ‘solely’ of the disclosure.”
In an effort to distinguish its disclosure from that in the
Syed case, CheckSmart told the court that the additional information in its
form actually furthered the FCRA’s purpose.
“We disagree,” the court 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.”
Plain meaning trumps purpose, the Ninth Circuit said,
rejecting the employer’s contention that its disclosure form was consistent
with the intent of the FCRA. Since the surplus language included disclosures
required by various state laws that were inapplicable to Gilberg, the court was
unable to understand how the CheckSmart form comported with the purpose of the
federal statute.
“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 declared.
“Syed holds that the standalone requirement forecloses
implicit exceptions,” the panel 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 the FCRA.”
In addition to ruling that the district court erred in
concluding that the employer’s disclosure form satisfied the FCRA’s standalone
document requirement, the Ninth Circuit also held that CheckSmart’s disclosure
form was not “clear and conspicuous” under either FCRA or ICRAA.
The court grudgingly found the form to be “conspicuous”
(despite characterizing the font as “inadvisably” small and cramped) but held
it was not “clear.” The disclosure contained language a reasonable person would
not understand, the court said, and its content would confuse a reader with the
combination of federal and state disclosures.
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. The Ninth Circuit reversed dismissal of
Gilberg’s complaint and remanded the case to the California district court. (As
of this writing, there is a petition for rehearing and rehearing en banc
pending before the 9th Circuit.)
For employers, the Ninth Circuit opinion could not be more
clear: ensure that the FCRA disclosure form provided to job candidates contains
no extraneous or surplus language. The decision also provides an important
reminder about keeping disclosures forms clear and conspicuous in order to
comply with both federal and state laws.