Connor v. First Student, Inc., the CCRAA, the ICRAA, and Notification Requirements for Employment Background Checks

If you are like a large number of California residents, you are likely concerned about what exactly an employer is allowed to discover about you as part of their routine employee background checks. There are a large number of rules governing employee background checks, both federally and at the state level.

One recent Supreme Court of California case revolved around the history and purposes of various statutory schemes regarding employee background checks, and determined that the Investigative Consumer Reporting Agencies Act (“ICRAA”) is not unconstitutionally vague despite the numerous overlapping goals and protections that the ICRAA shares with the California’s Consumer Credit Reporting Agencies Act (“CCRAA”). The case itself simply establishes that the ICRAA requirements must still be satisfied, even if it seems to predominantly implicate the CCRAA. 

I. Federal Law – The Fair Credit Reporting Act

In 1970, Congress passed the Fair Credit Reporting Act  (“FCRA”). The FCRA defined a “consumer report” to include an individual’s “credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.”  The FCRA specifically governs “background checks” for the primary purpose of “hiring, promotion, retention, or reassignment.” Importantly, the FCRA distinguished between consumer reports that contained information obtained by personal interviews, and consumer reports that were gathered by other means. In laymen’s terms, the FCRA distinguished between information obtained by reviewing your purchase, and payment history (among other things), and information obtained by asking questions, to actual people.

Over time, the federal government realized how important these protections were to consumers, and employees, alike. In response to this realization, Congress passed the Omnibus Consolidation Appropriations Act of 1997, which was designed to enhance the FCRA’s previous privacy protections to consumers.

These rules generally referred to background reports created by outside companies; a company did not necessarily need to comply with the FCRA requirements if they created the report themselves, without outside help. It is important to remember that under the supremacy clause, state laws are required to provide at least as much protection as their federal counterparts (except in certain circumstances which are beyond the scope of this article) – there is no rule preventing a state from providing more protection than the federal law. California is a state that provides their citizens with more protections than the federal government in this context. In the next section, we will discuss the birth of California’s ICRAA and CCRAA, their specific purposes, and some of the requirements of those laws.

2. California Law – The ICRAA and the CCRAA

As mentioned above, the federal law is the floor, not the ceiling. Therefore, states like California aimed to protect their citizens, in the employment context, more than the federal statutory schemes.

Initially, California’s laws closely mirrored the FCRA (as opposed to reflecting the statute’s purpose but pursuing those purposes more vigorously); 5 years after the adoption of the Consumer Credit Reporting Act, California took its first big step towards strong protections for potential employees by passing the first iteration of the ICRAA and the CCRAA. In 1998, California stopped distinguishing between the purposes of the report, and began focusing on the nature of the information obtained.

In 1970, the same year that Congress passed the FCRA, California passed the Consumer Credit Reporting Act, which governed “credit rating reports” that included consumer credit record and standing reports. In 1975, the California legislature realized that the previous Consumer Credit Reporting Act did not cover everything they had intended it to, and repealed the act. In its place, California enacted the ICRAA and the CCRAA to govern consumer background reports, including checks conducted for employment purposes.

Both the ICRAA and the CCRAA were created in the image of the FCRA, and the ICRAA and CCRAA were designed to reach complementary but not identical goals. The statues’ purposes were to guarantee that consumer reporting agencies (“CRAs”) “exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.”

As originally enacted, ICRAA applied to consumer reports that included character information obtained only through personal interviews. The statute was, in part, designed to protect consumers from identity theft by giving them “copies of any investigative consumer reports made on them.”

Until 1998, consumer reports were classified under either the CCRAA or the ICRAA. This distinction was largely based on the methodology used to collect the information that went into those reports. The CCRAA defined “consumer credit report” to include “any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, or credit capacity, which is used or is expected to be used . . . for . . . employment purposes.”

The CCRA’s definition excluded “any report containing information solely on a consumer’s character, general reputation, personal characteristics, or mode of living which is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on, or others with whom he is acquainted or who may have knowledge concerning any such items of information.” Thus, certain reports containing information gathered through personal interviews were only governed by the ICRAA. However, both the ICRAA and the CCRAA governed reports that contained information relating to character and creditworthiness, based on public information and personal interviews that were used for employment background purposes.

Two years after Congress passed the Omnibus Consolidation Appropriations Act of 1997, California responded to the sheer volume of employers using background checks to prescreen applicants, and was intended to promote disclosure and accuracy in background checks, especially in the rental, employment, and insurance contexts.” California’s response was to amend the ICRAA to eliminate the personal interview limitation and expand the statute’s scope to include character information obtained under CCRAA or “obtained through any means.”

The amended ICRAA states that “[a]n investigative consumer reporting agency” may provide an “investigative consumer report” to a person other than the subject of the report under limited circumstances. Such a report can be given to a person who “[i]ntends to use the information for employment purposes.”

A company that collects information about an individual’s  “moral character, personal characteristics, general reputation, and mode of living” is referred to as an Investigative Consumer Reporting Agency (“ICRA”).

The amended ICRAA further requires an ICRA, which is collecting information for employment purposes “other than suspicion of wrongdoing or misconduct by the subject of the investigation”, to “certify to the investigating consumer reporting agency” that it provided the consumer a “clear and conspicuous disclosure in writing” that includes the act’s disclosure requirements, and that the consumer gave a written authorization for the report’s procurement.

In the event the recipient of an investigative report takes an adverse employment action against the consumer based on information in the report, the person taking the action must provide the consumer with the name and address of the investigative consumer agency that supplied that report.

California amended its law again, as it relates to background checks for job applicants, in 2001; providing job applicants with greater protections than those that were previously afforded to the job applicant.

Once a potential employee seeks an employment with an employer, California requires extensive notifications to that job applicant, more so than that required by FCRA. Prior to allowing an outside agency to compile a report on a job applicant, the applicant must receive notice that: (1) informs the employee of the purpose of the report, (2) informs the employee of the name, number, and address of the company that is compiling the report, (3) informs the employee of their rights to review all reports obtained by the company compiling the report; and (4) provides the employee with a copy of that report within three (3) business days of the employers receipt, if the employee requests to receive the report.

An employer is not allowed to obtain a background report on an employee without their consent. As mentioned above, the California laws are in addition to, not instead of the FCRA; an employee is entitled to all the protections set forth in Part I of this series.

The Connor v. First Student, Inc. case may seem inconsequential, but it stands for the principal that any background check, even one that implicates the CCRAA, requires an employer to comply with the ICRAA requirements if the background check reported on Connor’s “character, general reputation, personal characteristics, or mode of living.” This is particularly important in the modern era where many creative methods of investigating a potential employee are being utilized; it is critical that employees be made aware of precisely what is going on.