Last month the California Supreme Court ruled in favor of a class of 1,400 student bus drivers who sued their employer for failing to comply with state background check laws. The Court’s decision is notable because it is part of a broader trend of states and cities making it more difficult for employers to use background checks. Under Connor v. First Student, Inc., employers in California must comply with overlapping statutes regulating investigative consumer reporting agencies.

California has two primary laws regulating the collection and dissemination of background information:

  1. The Consumer Credit Reporting Agencies Act – The CCRAA covers information “bearing on a consumer’s credit worthiness, credit standing, or credit capacity,” and does not have a written authorization requirement.
  2. The Investigative Consumer Reporting Agencies Act – The ICRAA covers background checks in which information on a consumer’s “character, general reputation, personal characteristics, or mode of living” is obtained through any means. Among other things, ICRAA requires the person procuring the report to certify that they made certain required disclosures, and that the consumer gave written authorization for the report’s procurement. The ICRAA generally imposes greater obligations than the CCRAA.

Background

Eileen Connor worked as a school bus driver for Laidlaw, which First Student acquired in 2007. First Student requested background checks on its employees that elicited information about the employees, including criminal records, sex offender registries, address history, driving records, and employment history. First Student provided a notice that included a check box that generally described Connor’s rights under ICRAA and informed her that she could check the box if she wanted to receive a copy of the report.

Thereafter, Connor filed a lawsuit alleging that the notice did not satisfy ICRAA’s specific requirements and that her employer failed to obtain her written authorization to conduct the background check, as ICRAA requires.

First Student moved for summary judgment arguing that ICRAA was unconstitutionally vague because the background information at issue related both to the plaintiff’s character and her credit worthiness and, as such, it was impossible for the employer to determine whether it was governed by the requirements of the ICRAA or the CCRAA. The trial court granted First Student’s motion, but the Court of Appeal reversed in 2015, finding that although there was some overlap between the two statutes, it was possible to comply with each act without violating the other.

The California Supreme Court’s Decision

The Supreme Court agreed with the Court of Appeal’s ruling and found that both the ICRAA and the CCRAA were sufficiently clear to indicate that both applied to Connor’s background report and that neither statute was rendered unconstitutionally vague. The Supreme Court held that potential employers can comply with both statutes without undermining the purpose of either.

The Supreme Court also found that the background check was an investigative consumer report as defined by the ICRAA as it reported on information about Connor’s character, general reputation, personal characteristics, or mode of living. The fact that the CCRAA also applied did not exempt First Student from the requirement to obtain Connor’s written authorization under the ICRAA before conducting the background investigation.

Takeaways

To the extent that employers request background information that falls under both statutes, it is important to comply with the requirements of both laws, even if that requires greater formality in obtaining the records (e.g., seeking a employee’s written authorization to conduct a credit check if it appears possible that the information ultimately received may be covered by ICRAA).

Background checks can be a tricky area of employment law from how they are obtained, to when they are obtained and how the information is used. As such, we recommend employers, particularly in California, audit their job application procedures and forms on a regular and rolling basis.

For multinational employers, it is important to note that in most countries local laws restrict the ability to access, collect or use an applicant’s personal information, particularly with regard to criminal history information (e.g. Singapore and Hong Kong). The best approach is to work with counsel to tailor criminal background checks to local requirements, based on factors such as the company’s industry, business needs, risk tolerance and global footprint.

Please reach out to your Baker McKenzie employment lawyer with any questions.