After the District Court for the District of Oregon dismissed a Fair Credit Reporting Act (FCRA) suit filed against Fred Meyer, Inc., the Ninth Circuit Court of Appeals partially reversed, holding Fred Meyer had failed to comply with FCRA’s “standalone” requirement by providing, in good faith, an extraneous explanation of the applicant’s rights in its background check disclosure. On remand, the District Court granted partial summary judgment to Fred Meyer, holding that (1) Fred Meyer’s disclosure notice was “clear and conspicuous” as required under the FCRA, and (2) Fred Meyer’s failure to comply with the FCRA’s “standalone” requirement was not willful. The case is Walker v. Fred Meyer, Inc., No. 3:17-cv-1791 (D. Or. 2021).
Plaintiff Daniel Walker applied for employment with defendant Fred Meyer, Inc. Walker was hired by Fred Meyer contingent upon the results of a background investigation. After Walker was dismissed from his position following an unsatisfactory result on his background check, he sued Fred Meyer, arguing that the disclosures given to him describing the background check process violated the FCRA.
Before an employer pulls a consumer report for employment purposes, the FCRA requires the employer to give the applicant a “clear and conspicuous” disclosure that the employer may obtain such a report. The disclosure must be “in a document that consists solely of the disclosure.” 15 U.S.C. 1681b(b)(2)(A)(i) (the “standalone requirement). After Walker’s case was dismissed but before it reached the Ninth Circuit, the Court of Appeals held that these requirements “do not allow for the inclusion of any extraneous information in the consumer report disclosure, even if such information is related to the disclosure.” See Gilberg v. Cal. Check Cashing Stores, LLC, 913 F.3d 1169, 1175–76 (9th Cir. 2019). In Walker’s appeal, the Ninth Circuit examined “as a matter of first impression” what information may be included in the disclosure. The court held that beyond a plain statement disclosing that a consumer report may be obtained for employment purposes, the disclosure may also include some concise explanation of what that phrase means, such as describing briefly what a consumer report is, how it will be obtained, and the type of employment purposes for which it may be used. The court held that additional information regarding Walker’s rights under federal and state law — although likely included by Fred Meyer in good faith — was extraneous. The court remanded to the District of Oregon to determine, however, whether the “remaining language” of the disclosure was “clear and conspicuous.”
On remand, the case was referred to a magistrate judge, who issued a report and recommendation that was fully adopted by the District Court. The court first held that Fred Meyer’s disclosure was clear and conspicuous. The court concluded that the Ninth Circuit’s remand instructions required it to consider only whether the language properly included in the disclosure was clear and conspicuous, excluding the paragraphs identified as extraneous. Looking only to the remaining paragraphs, the court concluded that Fred Meyer’s disclosure was both clear and conspicuous because it was reasonably understandable and noticeable to the consumer.
On the question of willfulness, the court held that Fred Meyer’s failure to comply with the FCRA’s “standalone” requirement was not willful. The court noted the Ninth Circuit’s decision remanding the case defined the term “disclosure” in the FCRA’s standalone requirement for the first time, and therefore, Fred Meyer’s disclosure was not based on an “objectively unreasonable” interpretation of the FCRA at the time Walker applied for his position. The Ninth Circuit had made it clear it was addressing an issue of first impression regarding what qualifies as part of the disclosure specified in the FCRA’s standalone requirement. Further, the Ninth Circuit’s determination that Fred Meyer’s disclosure failed to comply with the standalone requirement was based on the 2019 Gilberg decision — which was decided after Fred Meyer provided the disclosure to Walker. Further, although the Ninth Circuit held that the extraneous information regarding Walker’s legal rights should have been provided in a separate document, it noted that the information appeared to have been included “in good faith.” Accordingly, the violation was not willful.
Walker objected to the magistrate judge’s application of Ninth Circuit precedent on willfulness and the FCRA’s “clear and conspicuous” requirement, but the District Court rejected these objections after a de novo review, and fully adopted the magistrate judge’s recommendation.
Although Fred Meyer succeeded in demonstrating that its noncompliance in this case was not willful due to the intervening development of the law and its good faith, employers utilizing background screening should note that the Ninth Circuit’s decisions in Gilberg and Walker now provide notice that strict compliance with the FCRA’s standalone requirement is vitally important. Troutman Pepper will continue to track new developments in the case law addressing this issue and other obligations placed on employers and background screeners under the FCRA.