The Gilberg Decision: What a Recent Court Case Reminds Us about the FCRA

Background check lawsuits have increased in number over the past ten years. According to CBS News, background check companies and employers have paid more than $325 million to settle litigation related to background screening policies. Major companies such as Amazon, Walmart, Target, and Uber have found themselves the defendants in these cases along with many other employers. Most of those lawsuits have involved breaches in FCRA compliance. In most cases, employers didn’t willfully violate the federal act but instead made careless mistakes that opened them up to legal action. 

The FCRA is confusing to many employers, in part because it is extensive. The act spans both sides of the background check process, outlining steps that employers must follow both before they conduct the check and after they have received the results. At backgroundchecks.com, we have published numerous resources that employers can use to help them understand the FCRA, including the in-depth FCRA Compliance guide in our Learning Center. 

One of the most overlooked aspects of the FCRA is disclosure. Before an employer can conduct a background check on a prospective employer, it must 1) disclose its intention to conduct a criminal background checks (or any background checks) for employment purposes, and 2) obtain written permission from the candidate to proceed with the background check. 

 This disclosure must be presented on a standalone form without any extraneous information or material. The disclosure can be combined with the authorization form, but that combined form cannot include any additional information. It must be clear what the candidate is agreeing to when he or she signs the document. 

Often, employers overlook this facet of the FCRA—a mistake that can prove to be extremely costly. The Gilberg decision should serve as a reminder to employers that they need to follow the FCRA to the letter. In Gilberg v. California Check Cashing Stores, LLC., a federal appeals court found that a disclosure form violated the FCRA in two ways. First, the disclosure form included “extraneous and irrelevant information beyond what the FCRA requires”—state-specific legal disclosures. Second, the federal appellate court found that the form did not satisfy the FCRA’s requirement for a “clear and conspicuous” disclosure. 

Between confusing language, a fragmented sentence, and the mix of federal and state disclosures, the court argued that the form could confuse readers, and that job candidates might not know what they were authorizing.  While the case initially ended in a district court’s summary judgment in favor of the defendant, a federal appellate court has since reversed the decision and sided with the plaintiff. 

The lesson is clear: employers need to review their policies—from their disclosure forms to their how they notify candidates that have been disqualified due to findings from criminal background checks—and align them with the FCRA. At backgroundchecks.com, we help by providing useful resources, including sample disclosure forms, sample authorization forms, consumer summary of rights documents. Contact us today if you have questions about FCRA compliance.