California Supreme Court Upholds State Background Check Law

Concluding a long, drawn-out legal battle, the California Supreme Court issued an opinion on August 20, 2018 finding the state’s Investigative Consumer Reporting Agencies Act (ICRAA) is not “unconstitutionally vague”.

As background, California has two laws that may impact employers’ use of background report information:

• Investigative Consumer Reporting Agencies Act (ICRAA): Governs the use of “investigative consumer reports” which includes all potential check types (i.e., criminal, driving record/MVR, reference, employment and education verifications, etc.) minus arguably credit information.
• Consumer Credit Reporting Agencies Act (CCRAA): Applies to credit information used to develop a credit report.

Originally, the plaintiff (representing a class of current and former bus drivers) sued the employer claiming the disclosure form provided, titled “Investigative Consumer Report Disclosure and Release”, did not comply with ICRAA’s requirements. The disclosure form included several items of information including the potential scope of the background check, authorization for the background screening company to prepare the report, a check box describing the individual’s rights under ICRAA that also allowed the individual to request a copy of the report, etc. The disclosure form also contained a waiver of liability from all claims and damages arising out of the background investigation.

In its motion for summary judgment, the employer claimed that: (i) ICRAA was unconstitutionally vague as it overlapped with the CCRAA and (ii) that its disclosure satisfied CCRAA’s requirements. The trial court originally granted the employer’s motion, which was later reversed by the Court of Appeal which led to the state Supreme Court’s consideration of the issue.

Upon review of the constitutionality issue, the Supreme Court sided with the Court of Appeal finding that:

Potential employers can comply with both statutes without undermining the purpose of either. If an employer seeks a consumer’s credit records exclusively, then the employer need only comply with CCRAA. An employer seeking other information that is obtained by any means must comply with ICRAA. In the event that any other information revealed in an ICRAA background check contains a subject’s credit information and the two statues thus overlap, a regulated party is expected to know and follow the requirements of both statutes…

The case has now been remanded to the lower court to determine whether the employer complied with ICRAA.
Although it can be potentially confusing for employers to navigate several different state laws, the Supreme Court’s opinion arguably provided some much-needed clarity in terms of expectations of employer compliance. Given the complexities involved and the highly litigious landscape in California, we recommend consultation with qualified legal counsel to review compliance with both ICRAA and CCRAA.