In a rare development, a California state court of appeals has opined on the requirements for obtaining authorization for background checks pursuant to the Fair Credit Reporting Act.

In Hebert v. Barnes & Noble, Inc., the plaintiff filed a putative class action against retailer Barnes & Noble, contending it willfully violated the FCRA by providing job applicants with a disclosure that included extraneous language unrelated to the topic of consumer reports.  The plaintiff alleged that this extraneous language violated the FCRA’s requirement that an employer provide a standalone disclosure informing the applicant that an employer may obtain the applicant’s consumer report when making a hiring decision pursuant to 15 U.S.C. §§ 1681a(h) and 1681b(b)(1)(A).

Following discovery, Barnes & Noble filed a motion for summary judgment arguing that no reasonable jury could find that its purported FCRA violation was willful, as the erroneous disclosure form was the result of a mistake in drafting that occurred when Barnes & Noble revised a sample disclosure provided by a consumer reporting agency to ensure compliance with the FCRA.  Barnes & Noble’s disclosure inadvertently included the following footnote:

Please note: Nothing contained herein should be construed as legal advice or guidance.  Employers should consult their own counsel about their compliance responsibilities under the FCRA and applicable state law.  [The background check company] expressly disclaims any warranties or responsibility or damages associated with or arising out of information provided herein.

The trial court agreed with Barnes & Noble, granting its motion, and entering judgment in its favor, agreeing that any non-compliance resulted from a drafting error when it attempted to update the sample disclosure.  The plaintiff appealed and the California Court of Appeal reversed and remanded the case to the trial court, holding that a reasonable jury could find Barnes & Noble’s violation was willful under the FCRA.

The Court’s analysis was two-pronged: (1) the Court reasoned that the plaintiff provided sufficient evidence through which a reasonable jury could find a willful violation of the FCRA; and (2) the Court noted that willfulness is typically a question for the jury.

Considering the evidence before it, the Court noted that (i) Barnes & Noble’s employees, as well as outside counsel, were aware that the extraneous language would be included in the disclosure prior to its use; (ii) the disclosure was included in the documents provided to applicants for a period of two years before being corrected; (iii) Barnes & Noble “continued and prolonged use” of the “problematic” disclosure form “suggest[ed] that it had no proactive monitoring system in place to ensure its disclosure was FCRA-complaint”; and (iv) Barnes & Noble’s decision to entrust certain FCRA compliance issues to non-attorneys could support a conclusion that its actions were willful.  Finally, the Court noted that questions of willfulness were generally reserved to the jury under Ninth Circuit law.

Although non-precedential, the Hebert decision underscores the industry’s need for hypervigilance when it comes to the requirements for obtaining a consumer’s credit report under the FCRA.  As part of such hypervigilance, companies would be well served by having their policies and procedures periodically reviewed and updated with the assistance of both in-house and outside counsel.