On March 20, 2020, the Ninth Circuit issued its opinion Walker v. Fred Meyer, Inc., 2020 U.S. App. LEXIS 8809 (9th Cir. Mar. 20, 2020) and created a “concise explanation” standard to judge when an employer’s background check disclosure form violates FCRA.

Plaintiff applied for a job at Fred Meyer’s supermarkets.  As part of the application process, plaintiff completed two forms related to a background check.  The first form was a “Disclosure Regarding Consumer Reports and Investigative Consumer Reports.”  The second form was an “Authorization Regarding Consumer Reports and Investigative Consumer Reports.”

Plaintiff was hired but then received a “pre-adverse action notice” created by the consumer reporting agency.  The “pre-adverse action notice” provided a copy of the consumer report and informed plaintiff that he could dispute the accuracy of the report with the consumer reporting agency.  Ultimately, Fred Meyer terminated plaintiff based on information found in his consumer report.

Plaintiff then filed a class action and alleged that Fred Meyer willfully violated FCRA in two respects: (1) the Disclosure Form was unclear and contained extraneous information, in violation of 1681b(b)(2)(a); and (2) the pre-adverse action notice failed to notify plaintiff that he could discuss the consumer report directly with Fred Meyer, in violation of 15 U.S.C. 1681b(b)(3).

FCRA provides that an employer may obtain a consumer report about a job applicant if it provides a “clear and conspicuous disclosure . . . in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes” and obtains the applicant’s authorization in writing.

Previously, in Gilberg v. California Check Cashing Stores LLC, the Ninth Circuit held that a disclosure form violates FCRA’s standalone requirement if it contains extraneous information beyond the disclosure required by FCRA.   The issue in Walker is the logical next step:  If the term “disclosure” is not defined in FCRA, and FCRA does not explain what information is considered part of the “disclosure,” then what language counts as the disclosure itself?  In other words, how much information is too much before running afoul of the “extraneous information” holding of Gilberg?

As a matter of first impression, the Ninth Circuit held that an employer may include “some concise explanation” of what the phrase “that a consumer report may be obtained for employment purposes” means as part of the disclosure required by FCRA.  The Ninth Circuit then listed several items that would be deemed permissible under this newly formed “concise explanation” standard, such as briefly explaining what a consumer report is, how the company will acquire the consumer report, and for what employment decisions the employer will use the form.  The court then engaged in a paragraph-by-paragraph analysis of Fred Meyer’s Disclosure Form based on this new standard.

Paragraph Court’s Analysis
We ([t]he Kroger family of companies] will obtain one or more consumer or investigative consumer reports (or both) about you for employment purposes.  These purposes may include hiring, contract, assignment, promotion, reassignment, and termination.  The reports will include information about your character, general reputation, personal characteristics, and mode of living. The court held that this language was permissible because it provided the required disclosure and “helpfully explains” what a consumer report is and how it will be used by the employer. The court rejected the Plaintiff’s argument that this paragraph violated the standalone requirement because it mentioned investigative consumer reports because “investigative consumer reports” are a subcategory of consumer reports.
We will obtain these reports through a consumer reporting agency.  The consumer reporting agency is General Information Services, Inc.  GIS’s address is P.O. Box 353, Chapin, SC 29036.  GIS’s telephone number is (866) 265-4917.  GIS’s website is at www.geninfo.com   To prepare the reports, GIS may investigate your education, work history, professional licenses and credentials, references, address history, social security number validity, right to work, criminal record, lawsuits, driving record and any other information with public or private information sources.   The court held that these two paragraphs were permissible because they provided “helpful information” about who will provide the report to the employer and what information will be examined in order to generate the report.
You may inspect GIS’s files about you (in person, by mail, or by phone) by providing identification to GIS.  If you do, GIS will provide you help to understand the files, including communication with trained personnel and an explanation of any codes.  Another person may accompany. You by providing identification.  If GIS obtains any information by interview, you have the right to obtain a complete and accurate disclosure of the scope and nature of the investigation preformed. The court held that these two paragraphs violated FCRA.  While recognizing that these paragraphs “appear to have been included in good faith,” the court found that the paragraphs nonetheless violated FCRA standalone disclosure requirement because of the potential to confuse the applicant about his rights to inspect the consumer reporting agency’s files as opposed to the privacy rights protected by FCRA.  The court stated that Fred Meyer could have avoided this result by including this language on a separate document.

Plaintiff also argued that Fred Meyer violated FCRA by failing to advise him in the pre-adverse action notice that he could dispute his consumer report directly with the employer.

Before taking “adverse action” against an employee or job applicant based on a consumer report, FCRA requires that the employer provide a copy of the consumer report and the “summary of rights” document promulgated by the Consumer Financial Protection Bureau (CFPB).

Plaintiff argued that FCRA encompasses the right to dispute the information in the consumer report directly with the employer.  In other words, he argued that he should have had an opportunity to discuss the pre-adverse action notice directly with Fred Meyer in hopes of saving his job.  Because Fred Meyer’s pre-adverse action notice did not advise him of this right, Plaintiff argued it violated FCRA.  The Ninth Circuit disagreed and held nothing in FCRA or the legislative history required that a consumer be provided an opportunity to discuss his consumer report directly with his employer before adverse action is taken.