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Background checks are standard procedure for many employers as part of the employee application or onboarding process. It seems obvious that the applicant or employee knows they are consenting to a background check, what the purpose of the background check is, and who is conducting the background check. Unfortunately, this assumption has subjected employers to numerous statutory violations under two related Acts.
The Fair Credit Reporting Act (“FCRA”) and the California Investigative Consumer Reporting Agency Act (“ICRAA”) are two independent but similar Acts outlining various requirements that an employer must satisfy when procuring a background check. Under the FCRA, the employer must notify a job applicant in writing that the employer may obtain a criminal background check. 15 U.S.C. § 1681d(a)(1). The FCRA also forbids the employer from obtaining a background check for employment purposes unless there has been a clear and conspicuous disclosure in writing to the employee before the report is procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes, and the employee has authorized in writing the procurement of the report by that person. 15 U.S.C. § 1681b(b)(2)(A)(i)-(ii). This means that the employer must provide a standalone document consisting solely of the disclosure that the employer is conducting a background check. Syed v. M-I, LLC (9th Cir. 2017) 853 F.3d 492, 500. This disclosure may be provided at the same time as the applicant’s other employment documents so long as it is a standalone document. Luna v. Hansen and Adkins Auto Transport, Inc. (9th Cir. 2020) 956 F.3d 1151, 1153). If the employer fails to follow these requirements, they could be subject to statutory penalties between $100 and $1,000 and possible punitive damages. 15 U.S.C.A. § 1681n(a)(1)-(3).
Similarly, the ICRAA requires that an employer procuring a background check for employment purposes must provide a clear and conspicuous disclosure in writing to the employee at any time before the report is procured or caused to be made in a document that consists solely of the disclosure that states:
Cal. Civ. Code § 1786.16, subd. (a)(2)(B)(i)-(vi). In addition, the applicant must authorize the procurement of the background check in writing, the employer must certify to the agency conducting the background report that they have provided the necessary disclosures to the applicant, and the employer must provide a copy of the report to the applicant. Id. at subd. (a)(2)(C) & (a)(2)(4)-(5). Like the FCRA, the ICRAA entitles an employee to recover actual damages suffered as a result of the employer’s failure to comply with the ICRAA or a statutory violation of $10,000, whichever is greater. Cal. Civ. Code § 1786.50, subd. (a).
Examples of disclosure statements that do and do not comply with the ICRAA are contained in the following hyperlink: https://icraa.com/the-most-common-icraa-errors-and-violations/.
In sum, it is important for employers to know the requirements of the FCRA and ICRAA and ensure their background check disclosures are strictly complying with these requirements in order to avoid liability. Employers who are unaware of these requirements should review their background check disclosure forms and ensure that they meet the requirements set forth in the FCRA and ICRAA.