Ninth Circuit Rejects “Novel” FCRA Standalone Theory

Seyfarth Synopsis: In recent years, federal courts have weighed in on the Fair Credit Reporting Act’s (FCRA) requirement that consumer report disclosures be in a standalone document consisting solely of the disclosure. Recently, the Ninth Circuit rejected a former employee’s argument that his employer violated the FCRA when it provided the consumer report disclosure with other application materials, concluding that this “novel” interpretation of the FCRA “stretches the statute’s requirements beyond the limits of law and common sense” and “is thwarted by the statute itself.” Luna v. Hansen & Adkins Auto Transport, Inc.

The Facts

The FCRA requires employers who obtain a background check report on a job applicant to first provide the applicant with a “clear and conspicuous disclosure” in a document that consists solely of the disclosure that the employer may obtain such a report. In recent years, the Ninth Circuit has considered the extent to which certain text in the disclosure is considered extraneous and, thus, violates the standalone requirement.

In Luna, the plaintiff did not take issue with the language in the consumer report disclosure. Instead, he brought a class action lawsuit claiming that his former employer violated the FCRA by (1) providing the disclosure simultaneously with other application materials and (2) failing to place the FCRA authorization on a standalone document. While the consumer report disclosure was on a standalone document, the authorization appeared at the end of the employment application, which included other notices, waivers, and agreements unrelated to acquiring the consumer report. The district court granted the employer’s motion for summary judgment.

The Ninth Circuit’s Decision

On April 24, 2020, the Ninth Circuit held that the FCRA’s standalone requirement does not prohibit the presentation of the disclosure together with other application materials. The Court noted that while the FCRA requires the disclosure form contain nothing more than the disclosure itself, “no authority suggests that a disclosure must be distinct in time, as well.” In fact, according to the Court, if it were to accept the plaintiff’s argument, “it is difficult to see how an employer could ever provide an applicant written application materials without violating FCRA’s standalone document requirement.”

The Ninth Circuit was unconvinced with the plaintiff’s argument that the disclosure form was not “clear and conspicuous” because it was presented along with the authorization form. The FCRA’s “clear and conspicuous” standard mandates the disclosure be a “reasonably understandable form” that is “readily noticeable to the consumer.”  The Court included a full copy of the disclosure at issue in the opinion and concluded that “applicants, such as big-rig truckers, can be expected to notice a standalone document featuring a bolded, underlined, capital-lettered heading.”

Finally, in rejecting the plaintiff’s argument that the FCRA requires the authorization be in a standalone document, the Court explained that the FCRA simply says the consumer authorization must be “in writing” and, thus, the employer’s authorization was sufficient.

What Luna Means for Employers

While this decision is welcome news for employers, the more important and immediate consideration is that employers remain mindful of the FCRA’s hyper-technical requirements before ordering background checks on applicants or employees. As we advised here in our discussion of the Ninth Circuit’s most recent FCRA decision, Walker v. Fred Meyer, Inc., FCRA-mandated disclosures should be set out in a separate, standalone document, and not be included on the same document as other application paperwork, including even applicable disclosures mandated by other state laws, such as in California, which has its own unique disclosure requirements. All employers also should continue to be mindful of other laws regulating criminal records checks and screening policies, including state and local employment and ban-the-box laws and the growing body of laws restricting employer use of credit reports and other credit history information in hiring and other employment decisions.