An Update on an FCRA Disclosure Case

The Fair Credit Reporting Act’s (FCRA) disclosure requirements haven’t always been clear to employers. A recent update to a long-running case, Walker v. Fred Meyer, Inc., adds additional clarification. to what employers may need to do to comply.

Historical Areas of Confusion

Among other things, the FCRA requires employers to notify candidates of the potential use of a background check for employment purposes. The FCRA requires an employer to:

• Before a background report is procured, provide the applicant/employee with a clear and conspicuous written disclosure, in a document consisting solely of the disclosure, that the employer may obtain a background report on the applicant/employee for employment purposes

On the surface this disclosure requirement may seem straightforward. But employers have been accused of FCRA violations because they misinterpreted what this means. And regulators haven’t offered much guidance.

Luckily, courts have helped establish some points employers may want to consider. Let’s review a recent development in Walker, a case that has previously provided one court’s interpretation of FCRA disclosure requirements.

Walker v. Fred Meyer, Inc.

As previously discussed, the Ninth Circuit Court of Appeals reviewed defendant Fred Meyer’s disclosure document. The Ninth Circuit held, among other things, that some portions of Fred Meyer’s disclosure violated the FCRA’s “standalone disclosure requirement,” while other sections did not.  The Ninth Circuit then sent the case back to the District Court to determine if the remaining sections that did not violate the standalone disclosure requirement were “clear and conspicuous.”

The Latest – Partial Summary Judgement Granted

With the case returned to the lower court, Fred Meyer filed a motion for partial summary judgement seeking a declaration that:

1. Their disclosure was “clear and conspicuous”

2. The company didn’t act “willfully” with its violation of the standalone disclosure requirement

On August 13, 2021, a United States Magistrate Judge issued her findings and recommendation granting Fred Meyer’s motion for partial summary judgement. It was adopted by the District Court on September 24, 2021. Fred Meyer’s motion was granted.

In determining whether Fred Meyer’s disclosure was clear and conspicuous, the District Court relied on another recent Ninth Circuit disclosure case, Gilberg v. California Check Cashing Stores, LLC., stating, “The phrase ‘clear and conspicuous’ is not defined in the FCRA, but the Ninth Circuit has held [in Gilberg] that a disclosure is ‘clear’ when it is ‘reasonably understandable,’ and a disclosure is ‘conspicuous’ when it is ‘noticeable to the consumer.’”

The court found Fred Meyer’s disclosure language clear stating, “…as a whole does not suffer from grammatical errors or the kind of vague language the court found problematic in Gilberg.  Nor does the disclosure include any information regarding state laws that would ‘confuse a reasonable reader,’ like those in Gilberg.”

The court also determined that the disclosure is conspicuous stating, “First, the disclosure paragraphs are confined to a single page surrounded by ample whitespace and are preceded by a clear title [and]… The disclosure uses legible, clear font…Thus, there is no question that Fred Meyer’s disclosure is conspicuous as a matter of law.”

The Ninth Circuit found earlier that portions of Fred Meyer’s disclosure violated the standalone document requirement. In its recommendation to grant partial summary judgement for Fred Meyer, the District Court held that Fred Meyer’s violation was not a willful violation of the FCRA.

According to the court, “an FCRA violation is “willful” if it is made either knowingly or with “reckless disregard” for the requirements…” of the FCRA.  “An employer acts in ‘reckless disregard’ when “the action is not only a violation under a reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.”

Using this standard, the court determined that “…Fred Meyer’s disclosure was not based on an ‘objectively unreasonable’ interpretation of FCRA’s standalone requirement at the time Walker applied for a position.”  Even though Fred Meyer’s disclosure now violates the FCRA’s standalone disclosure requirement, it was not unreasonable for Fred Meyer to have provided Walker with the disclosure at the time it was provided.

The back-and-forth of these cases can be complex. But it offers valuable insights into the interpretation of FCRA requirements. Employers may want to review these decisions with their legal advisor to learn how they could impact them.