California Case Offers Insight on Potential Cost of Violating State Reporting Law

It may be apparent to employers that any violation of employment law can result in consequences. Often, the law spells out potential penalties. That’s the case with the California Investigative Consumer Reporting Agencies Act (ICRAA).

An Overview of ICRAA Damages

California employers, and employers hiring people who live or work in the state, may want to work with trusted legal counsel to determine if their background screening programs need to comply with both California and federal law. What’s at risk? Employers that violate California’s ICRAA may be required to provide monetary damages.

According to state law, the cost to employers that fail to meet California’s requirements may include:

• Actual damages sustained by the candidate due to the employer’s violation or, except in the case of class actions, $10,000, whichever is greater.
• The costs paid by the candidate to enforce the employer’s liability. This includes the costs of the legal action and reasonable attorney’s fees as determined by the Court.
• Punitive damages determined by the Court if the employer’s actions are found grossly negligent or willful.

How the Court May Interpret the Law

A recent order by the US District Court in the Southern District of California in the case of Garcia v. Quest Group Consulting, LLC looks at how the courts may calculate statutory damages under ICRAA.

According to the Court’s order, Garcia initially filed a claim in California state court alleging, among other things, violations of ICRAA. The court order states that Garcia’s complaint alleges that the Defendants employed Garcia as an hourly temp worker in California. Garcia further alleged that Defendants procured an investigative consumer report on her after requiring her to sign a deficient disclosure document, violating ICRAA. She seeks only the ICRAA statutory damages.

The Defendants removed the case from state court to federal court, arguing that the statutory damages Garcia is seeking exceed the required $75,000 threshold for hearing the case in federal court based on diversity jurisdiction.  Garcia filed a motion with the US District Court to remand the case back to state court.

The Defendants claimed that Garcia is seeking ICRAA damages of $120,000, plus attorney fees, because Garcia alleges the Defendants violated several sections of ICRAA.

Garcia claimed that her statutory damages should be lower, below the required threshold for hearing the case in federal court. She argued that she is only entitled to one statutory penalty because the Defendants only performed one background check. Garcia claimed that the law applies the penalty per defendant, not per violation.

The US District Court ruled in favor of Garcia and remanded the case back to state court. The ruling held that “…the ICRAA penalty applies per ‘investigative consumer report’” and not for individual alleged violations.

This case gives employers a peek at how courts may calculate ICRAA statutory damages in the future. Employers should talk with their legal team to understand how this could impact them.