Legal disclaimer: The following information on specific laws and regulations does not constitute legal advice. As always, compliance with federal, state and local laws is ultimately your responsibility. We recommend that you consult with legal counsel to ensure your processes and procedures are fully compliant.
If your FCRA disclosure and authorization (informally, what the industry used to simply call the “FCRA release”) references any city or state, it is almost certainly no longer compliant with the law. You are at risk for class-action lawsuits.
The Fair Credit Reporting Act (FCRA) has been one of the most contentious and expensive litigation areas for employers. All signs point to a continued increase in the number of FCRA cases being filed. In 2018, the number of filed FCRA cases was up 60% over the prior year. Most federal FCRA class action lawsuits allege hyper-technical violations and can end with settlements in the millions. Now, a recent decision by the Ninth Circuit Federal Court of Appeals has raised the bar on compliance with the FCRA even higher. This decision changed the law regarding disclosures and authorizations and as a result a great deal of carriers are no longer compliant.
At Tenstreet, we think about compliance all the time. We monitor the always-changing legal landscape and try our hardest to get the word out about changes in the law. We know that the FCRA uniquely impacts the trucking industry due to high turnover and the FMCSA’s requirement that carriers conduct an investigation into a driver’s safety performance history and obtain certain consumer reports such as MVRs and employment verifications. Most carriers go beyond these requirements and also pull consumer reports like CDLIS, criminal background checks, and credit reports. Prior to obtaining these types of consumer reports on an applicant, the FCRA requires employers to provide individuals with a disclosure and then obtain their authorization (the combination of which has historically been called a “release” in the industry).
Like most things, however, the devil’s in the details. The law specifically mandates “a clear and conspicuous disclosure” in a document that “consists solely” of the disclosure. What does this mean? Well, employers (including trucking companies) have spent hundreds of thousands of dollars on litigation and attorneys’ fees trying to answer that question.
Prior to the Ninth Circuit court’s most recent decision, courts have held that the FCRA disclosure must be a “stand-alone” document without any extraneous information such as waivers of liability for the employer or the consumer reporting agency. Other findings of extraneous information include acknowledgments of employment policies, certifications about the application, or links to marketing websites. Employers with extraneous information in their disclosures were found to have willfully violated the FCRA, costing them millions to settle class action lawsuits.
In this most recent decision, the Ninth Circuit ruled in Gilberg v. Cal. Check Cashing Stores that any reference to state law within the FCRA disclosure violates the FCRA, even if that information is state-mandated disclosure information about the individual’s rights related to a background check. In this case, the plaintiff, Gilberg, provided her authorization and the employer obtained a background check on her. She was subsequently hired and remained employed for five months. After voluntarily leaving her position, she filed a class action lawsuit alleging violations under the FCRA and violations under California state law. In this case, the disclosure and authorization language was combined on the same page as, and made reference to, multiple state law notices of rights, such as New York, California, Maine, and Oregon. The Ninth Circuit found that the inclusion of information regarding the legal rights afforded to an applicant in other states, combined with the FCRA-mandated disclosure, would “confuse a reasonable reader” and thus violate the requirement that the disclosure be clear.
The Ninth Circuit explicitly set out that “any surplusage” within the disclosure would violate the stand-alone requirement of the FCRA. However, the court did agree that not every page that the employer presents to an applicant during the hiring process constitutes one document, such that disclosures and authorizations and notices of rights can be presented on separate pages and not run afoul of the stand-alone document requirement. The court specifically explained that if that were not the case “it is difficult to see how an employer could ever provide an applicant written application materials without violating FCRA’s standalone document requirement.”
The Big Takeaway
Prior to this decision it was common to have disclosures of state law within the disclosure or authorization. Therefore, this decision will require most carriers to review and revise their disclosure and authorization forms. Take a look at your disclosure and authorization language. If it references California, Washington, or any other state – you’re no longer compliant. The same goes with words like “waiver” or “liability.” You want your FCRA disclosure to be short and sweet, only providing the applicant the required information in simple, easy to read, language. Also, it’s a best practice have your authorization presented on a separate page than the disclosure. Better yet, have an FCRA specific attorney look at your disclosure and authorization language and review your processes. When it comes to FCRA litigation, an employer’s biggest risk is the language used in your disclosure and authorization, as this is the basis for a majority of the class action lawsuits.
Staying up to date on all the compliance changes can be a burden. We’re providing you this update because we know you make decisions every day based on the information available to you. We want to provide our customers as much information about compliance as possible so you can make the best decisions for your company. Register for our Compliance 101 Deep Dive Webinar on Disclosures and Authorizations on March 21st at 2:00pm to learn more about disclosures and authorizations.
Thank you for the information provided here.
So, BIG question….
The standard releases provided by Tenstreet through the basic IntelliApp … Are those releases compliant with the latest Ninth Circuit Court ruling ?
Absolutely, TJ! Great question. If you’ve adopted our standard language that we provide to our clients, you’re compliant. But we recommend you work with your Account Manager to make sure you have this language in effect and consult with legal counsel to ensure your processes and procedures are fully compliant.