Background Reports in California? There’s a Disclosure for That!

You’re probably aware of the federal Fair Credit Reporting Act (“FCRA”) disclosure and authorization requirements for employers that want to obtain background reports from consumer reporting agencies like Verified Credentials on employees and applicants. If you want a quick refresher on the federal requirements, click here.

But did you know that you may be required to provide additional disclosures if you obtain background reports on applicants or employees that live or work in certain states? It’s true, and it’s something to keep in mind when you develop your background screening practices and procedures.

Let’s touch on some California-specific requirements. If you obtain background reports from Verified Credentials on applicants or employees who live or work in California, you may be required to provide unique, California-specific disclosures under the California Investigative Consumer Reporting Agencies Act (“ICRAA”).

ICRAA governs obtaining and using “investigative consumer reports” on applicants or employees who live or work in California. Keep in mind that the ICRAA defines an investigative consumer report as “a consumer report in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through any means.”

Insider Tip: Even though ICRAA and the FCRA each use the term “investigative consumer report,” the definitions are very different! You may be surprised to find that your background reports might be considered “investigative consumer reports” in California, even if they aren’t “investigative consumer reports” under the FCRA.

If your background reports fall under ICRAA’s definition of “investigative consumer reports,” ICRAA has specific requirements before you can obtain background reports on your California applicants and employees from Verified Credentials (with certain limited exceptions). You must:

• Have a permissible purpose, as defined by California law.
• Provide a clear and conspicuous disclosure in writing to the applicant or employee, at any time before the background report is obtained, in a document that consists solely of the disclosure, that: (1) States an “investigative consumer report” may be obtained; (2) Identifies the permissible purpose of the report; (3) States the report may include information on the applicant or employee’s character, general reputation, personal characteristics, and mode of living; (4) Identifies the name, address, and telephone number of Verified Credentials; (5) Notifies the applicant or employee in writing of the nature and scope of the investigation requested, including a summary of the provisions of California Civil Code Section 1786.22; (6) Notifies the applicant or employee of Verified Credentials’ website address, where the applicant or employee may find information about our privacy practices.
• Obtain the applicant or employee’s written authorization to procure the report.

You may think you have a handle on FCRA disclosure and authorization requirements. Still, if your applicants or employees live or work in California, it might be time to re-evaluate your disclosure documents to comply with California law. Consulting with a trusted legal advisor is the best way to ensure that your background screening practices comply with ICRAA.

Insider Tip: Do you obtain background reports on your applicants or employees who have mailing addresses in California bearing on their creditworthiness, credit standing, or credit capacity”? These are considered “consumer credit reports” in California and are governed by the California Consumer Credit Reporting Agencies Act (“CCRA”), not the ICRAA. The CCRA requires additional, specific disclosures in addition to ICRAA requirements. Be sure to check back next month for more information on the CCRA disclosure requirements.