Labor & Employment Law Daily FCRA disclosure document may contain ‘concise’ explanation of what consumer report entails, how it will be obtained
Tuesday, March 24, 2020

FCRA disclosure document may contain ‘concise’ explanation of what consumer report entails, how it will be obtained

By Kathleen Kapusta, J.D.

The appeals court also held that employers are not required by the FCRA to provide applicants with an opportunity to discuss their consumer reports directly with the employer.

Addressing an issue of first impression under the FCRA, the Ninth Circuit held that beyond a plain statement disclosing “that a consumer report may be obtained for employment purposes,” some concise explanation of what that phrase means may be included as part of the ‘disclosure’ required by § 1681b(b)(2)(A)(i).” As an example, said the court, a company could briefly describe what a consumer report entails, how it will be obtained, and for which type of employment purposes it may be used. Further, the court held that the right provided by the FCRA to dispute inaccurate information in a consumer report does not require employers to provide applicants or employees with an opportunity to discuss their consumer reports directly with the employer. The court affirmed in part and reversed in part the decision of the court below (Walker v. Fred Meyer, Inc., March 20, 2020, Tashima, A.).

The disclosure. Shortly after the applicant applied for a job with the supermarket chain, he was hired contingent on passing a background check. As part of the hiring process, he was given several disclosure and acknowledgment forms, including a Disclosure Regarding Consumer Reports and Investigative Consumer Reports, which explained that the employer would investigate his background using an employment background reporting company, General Information Services, Inc. (GIS). The disclosure was five paragraphs long.

Offer revoked. Several weeks later, GIS sent the employee a letter with a copy of the consumer report. The letter stated that he could dispute the accuracy or completeness of the report with GIS directly but provided no option for discussing it with the employer. Five days later, GIS sent a second letter informing him that the employer had, based on the consumer report, decided not to continue his employment.

Lower court proceedings. The applicant then filed a putative class action alleging that the employer had willfully violated the FCRA by providing an unclear disclosure form encumbered by extraneous information, in violation of 15 U.S.C. § 1681b(b)(2)(A) and by failing to notify him in the pre-adverse action notice that he could discuss the consumer report obtained about him directly with the employer. The employer moved to dismiss and the district court, granting the motion, held that the disclosure met the FCRA’s disclosure requirements because it was not overshadowed by extraneous information. Further, it held that the FCRA does not require that pre-adverse action notices inform an employee how to contact and discuss a consumer report directly with the employer.

Solely of the disclosure. On appeal, the applicant argued that the employer’s disclosure document did not consist “solely of the disclosure” as required by the FCRA because it contained extraneous information, including about investigative consumer reports, which also violated the FCRA’s “clear and conspicuous” requirement as it made the disclosure “muddled” and “confusing to consumers.” Addressing the FRCA’s standalone disclosure requirement, the Ninth Circuit first noted that in Syed v. M-I, LLC, it held that the standalone requirement was unambiguous and meant what it said. “Thus Ninth Circuit precedent reads the FCRA as mandating that a disclosure form contain nothing more than the disclosure itself,” the court wrote.

Gilberg. The district court held that the disclosure at issue complied with the FCRA’s standalone requirement because “some additional information” may be included as long as it is “closely related to the FCRA disclosure.” However, while the case was pending appeal, the Ninth Circuit issued Gilberg v. Cal. Check Cashing Stores, LLC, which, the court here pointed out, “forecloses the district court’s interpretation that the FCRA contains an implied exception allowing the inclusion of information that is ‘closely related’ to the disclosure.” In light of Gilberg, said the court, “a disclosure form violates the FCRA’s standalone requirement if it contains any extraneous information beyond the disclosure required by the FCRA.”

Concise explanation. Noting that the FRCA requires a standalone disclosure but does not define the term disclosure, the court held that “beyond a plain statement disclosing ‘that a consumer report may be obtained for employment purposes,’ some concise explanation of what that phrase means may be included as part of the ‘disclosure’ required by § 1681b(b)(2)(A)(i).” Specifically, said the court, an employer may briefly describe what a “consumer report” entails, how it will be “obtained,” and for which type of “employment purposes” it may be used.

Investigative consumer reports. Turning to the disclosure at issue, the applicant argued the first paragraph violated the standalone requirement because it mentioned investigative consumer reports in addition to consumer reports. But investigative reports, said the court, are a type of consumer report and thus disclosing that an investigative consumer report may be obtained for employment purposes does not violate the FCRA’s standalone disclosure mandate. Further, in addition to stating that consumer reports may be obtained for employment purposes, the first paragraph also explained what those “employment purposes” might include and what type of information might be included in the consumer report, which was in accordance with the standard just set by the court.

As for the second and third paragraphs, they explained what it means to “obtain” a consumer report by describing who would provide the report and what private and public information about the applicant would be examined to create a “consumer report.” Thus, this language did not violate the FCRA’s requirement that the disclosure consist solely of a “disclosure . . . that a consumer report will be obtained for employment purposes.”

The fourth and fifth paragraphs, however, provided information about an applicant’s rights to obtain and inspect information about GIS’ investigation of, and file about, the applicant, which, the court observed, could pull his or her attention away from the privacy rights protected the FCRA. This, this should have been provided in a separate document. As a result, these paragraphs violated the FCRA’s standalone disclosure requirement.

Clear and conspicuous. Turning to the FCRA’s “clear and conspicuous requirement,” the court noted that because Gilberg was not decided until after the district court’s decision, the court did not analyze the disclosure under the “clear and conspicuous” standard set forth in Gilberg. Nor did the parties have an opportunity to fully brief that standard on appeal. Accordingly, the Ninth Circuit remanded to the court below the issue of whether the language of the first through third paragraphs of the disclosure was sufficiently clear under the reasonable person standard set forth in Gilberg.

Pre-adverse action notice. Finally, the court rejected the applicant’s argument that because the employer’s pre-adverse action notice did not advise him of a right to speak directly with it, rather than with GIS, about any negative items in his consumer report, the notice violated the FCRA. Turning to the language of the statute, the court found that “while the FCRA does provide a right to dispute inaccurate information in a consumer report, [the applicant’s] interpretation that such a right mandates an opportunity for [him] to discuss his consumer report with [the employer] directly is unsupported by the text of the FCRA.”

Not only did he fail to cite a particular provision of the FCRA that establishes a right to dispute a report with an employer directly, he also failed to cite to any binding case law suggesting that the right to dispute is broader than what the FRCA sets forth, observed the court. “Because the text of the statute, the legislative history, and our precedent do not require that a consumer be provided an opportunity to discuss his consumer report directly with his employer before adverse action is taken against him, we hold that the pre-adverse action notice [he] received did not violate the FRCA.”

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