August 29th, 2018 | Debbie Lamb, Sterling Talent Solutions

California Supreme Court Upholds Background Check Compliance Requirements

A recent ruling by the California Supreme Court puts the background screening laws on a state level in the spotlight. California has two laws that regulate agencies that gather information about consumers to provide to employers, landlords and others for employment and housing considerations. The Investigative Consumer Reporting Agencies Act (ICRAA) requires prior notice and authorization before certain types of the background check are ordered for a candidate, and the other, Consumer Credit Reporting Agencies Act (CCRAA) covers more consumer-oriented information that doesn’t require advance disclosure or consent. Both laws require agencies to disclose to consumers when the reports are furnished and limit when they may be used.

Connor v. First Student

In Connor v. First Student, the California Supreme Court, in a unanimous ruling, upheld a state law that requires employers to obtain workers’ permission before hiring a company to check their background. According to Bloomberg Law, “The justices upheld a lower court ruling that school bus transportation company First Student Inc., part of FirstGroup plc, failed to adequately notify and obtain consent from former Laidlaw International Inc. bus drivers and aides before it conducted background checks on 54,000 workers. The reports were ordered after First Student bought Laidlaw in 2007.”

The case involves a background check report that falls under both California laws. In writing the decision for the case, the Supreme Court upheld a lower Appeals court ruling and stated, “We agree with the Court of Appeal and find that potential employers can comply with both statutes without undermining the purpose of either.”

The Court ruled that First Student must comply with the stricter ICRAA law even if the company was compliant with the less stringent CCRAA requirements. Bloomberg Law further explains, “The ruling covers a single Laidlaw employee in the bellwether case for more than 1,200 former workers alleging that First Student needed their approval for the background checks. The case now returns to an appeals court and then to the Los Angeles trial court.” Fines due to ICRAA violations can go up to $10,000 per violation.

Fair Credit Reporting Act Requirements

Each state, such as California as shown by the recent ruling, will have their own specific laws about background screening. Job applicants and candidates are protected under state, local and federal laws. One of the federal laws, the Fair Credit Reporting Act (FCRA), which dates back to the 1970’s, has laws protecting a consumer’s private information. The law covers both consumer and investigative consumer reporting. The background check services and programs that a Consumer Reporting Agency (CRA), such as Sterling Talent Solutions, provides fall under the regulation of the FCRA.

The FCRA requires CRA’s to follow four requirements:

  1. End User Certification – CRA’s are required to obtain a certification of compliance by the user (organizations) that the user will abide by the FCRA and other applicable laws.
  2. Disclosure & Authorization – Users must certify that it has a permissible purpose, that every individual who is screened has given consent in the form of a written authorization and disclosure prior to running the background check.
  3. Pre-Adverse Action – A notice is sent from the company (end user) to the candidate denying employment based on the findings of the background check. The notice is sent with a copy of the report, a federal summary of rights and state summary of rights (if applicable) and the ability for the candidate to dispute the findings.
  4. Adverse Action – If after the investigative portion is completed and the employer does not change their decision, a company must follow the adverse action steps, which includes sending an adverse action letter with another copy of the Federal Summary of Rights as well as State Summary of Rights.

As a general matter, all disqualification decisions should be based on individualized analysis of job-related issues raised by the report.

Federal and State Laws Impact Background Screening

Sterling Talent Solutions strives to keep its clients up to date on laws pertaining to the background screening industry. To find out more about FCRA Compliance, state and local law updates and information for the background screening industry, sign up for our quarterly FCRA update webinars, or you can listen to an On Demand version of earlier webinars.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.