Aceves, Jr., et al. v. AutoZone, Inc., Case No. 5:14-cv-02032, alleges violations of the federal Fair Credit Reporting Act (“FCRA”), the California Consumer Credit Reporting Agencies Act (“CCRAA”), and the California Investigative Consumer Reporting Agencies Act (“ICRAA”), all stemming from allegations that AutoZone improperly used credit checks during its hiring process. Specifically, the plaintiffs (a class of over 200,000 job applicants) allege that AutoZone failed to properly provide pre-authorization disclosures by embedding its pre-authorization form as a window within a multi-webpage employment application which contained unrelated information and omitted the required disclosures. On May 23, 2016, the Central District Court of California tentatively approved a $5.7 million dollar settlement for these alleged violations.

So, what are the rules for employee background checks in California?

The FCRA, which applies nationally and only to third-party (not employer) compiled background reports, requires employers to:

  • (1) Notify employees/potential employees in a separate, stand-alone document that an investigation may be performed;
  • (2) Give the opportunity to consent and obtain that consent;
  • (3) Obtain specific consent for medical information, if requested; and
  • (4) Specifically notify employees/potential employees if their neighbors, friends, or associates will be interviewed about their “character, general reputation, personal characteristics, or mode of living” (called an “investigative consumer report”).

If the employer uses the report as the basis for an adverse employment decision (e.g. refusal to hire or promote), the employer must provide the employee/potential employee with a pre-adverse action report and a copy of the report before the adverse employment decision may be made.

California adds to the FCRA protections in its CCRAA and ICRAA, which apply both to third-party and employer-compiled background reports. The CCRAA covers credit reports and the ICRAA covers investigative consumer reports.

The CCRAA restricts an employer’s right to obtain credit reports to specific types of positions including managerial and law enforcement positions, and positions that involve access to $10,000 or more in cash. (See Labor Code §1024.5(a) for a full list of positions). Before requesting a credit report, an employer must provide the employee/potential employee with the following notices (in addition to the FCRA requirements):

  • That the credit report will be used; and
  • Identifying the specific exception under Labor Code §1024.5 permitting use of the report.

Before requesting an investigative consumer report, the ICRAA requires an employer to provide the employee/potential employee with the following notices (in addition to the FCRA requirements):

  • Notice of the purpose of the report;
  • The name, address, and telephone number of the screening company;
  • A summary of the employee/potential employee’s right to see and copy the report; and
  • A box to check if the employee/potential employee wants a copy of the report.

Employers who fail to follow these statutory requirements (among others) are subject to civil liability for monetary damages, punitive damages, and attorneys’ fees and costs

For more information about your rights regarding employee background checks, and a free consultation, please call us at (619) 342-8000.