Lack of Training, Compliance Monitoring Factors in Willful FCRA Violation

A nationwide employer recently saw its summary judgment win in a Fair Credit Reporting Act (FCRA) class action suit thrown out the window in California state court.

The plaintiff alleged the employer willfully violated the Fair Credit Reporting Act (FCRA) by including extraneous information in its disclosure form. Specifically, the employer used the Consumer Reporting Agency’s (CRA): sample form that included the following disclaimer language:

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. [CRA] expressly disclaims any warranties or responsibility or damages associated with or arising out of information provided herein.

The employer failed to remove this disclaimer language when it proceeded to use the CRA’s sample forms. As outlined in the court’s opinion, the employer provided the form back to the CRA to load in its portal, had a chance to review the form in a test environment and still did not remove the disclaimer language. This form remained in use for two years until the employer switched background check companies.

The trial court granted summary judgment in favor of the employer agreeing with the argument that the extraneous information was merely a drafting error that did not represent a willful FCRA violation. Disagreeing with the trial court’s finding, the court of appeals determined a jury could find that the violation was willful. In its opinion, the court of appeals cited that the disclosure form requirement was an “unambiguous provision of the FCRA”, at least one employee knew of the extraneous information, the company may not have adequately trained employees on FCRA compliance and/or the company may not have monitored its disclosure form to ensure FCRA compliance.

Key Takeaway

Employers should review the court’s opinion in this case as there is an extensive discussion around where the employer made missteps (noted above). In particular, the court zeroed in on what appeared to be a lack of sufficient training for HR employees related to the FCRA who were then entrusted to ensure the company complied with the law. While the company in this case tried to take prudent steps, including outside counsel review of its forms, the court’s opinion demonstrates a more comprehensive approach to FCRA compliance may be required for employers.