No Good Deed Goes Unpunished? Use Lawyers to Avoid Trouble Related to Background Checks

by Brendan J. Begley
The Labor & Employment Law Blog

A precedential decision last week by the California Court of Appeal may leave some employers feeling like no good deed goes unpunished. That decision ruled that a jury would have to decide if an employer willfully violated the Fair Credit Reporting Act (“FRCA”) by letting a non-attorney manager communicate with outside lawyers to ensure that its background checks were in compliance with the FRCA.

The FRCA mandates that employers disclose information to job candidates concerning their legal rights in connection with background checks, and that such disclosures include specific language. The plaintiff in Herbert v. Barnes & Noble, Inc., alleges that the employer violated that federal law by including improper and potentially confusing extraneous language in its published FRCA disclosure form. The plaintiff further claims in that lawsuit, which is fashioned as a class action, that the employer’s FRCA violation was willful.

According to the appellate court’s decision, before publishing the seemingly flawed disclosure form, which it thereafter used for two years, the employer sought approval of the form from a national employment-law firm. However, the appellate decision indicates there was some miscommunication between the employer and its outside lawyers that arose after the employer’s in-house counsel went on a maternity leave. That maternity leave resulted in the responsibility of communicating with outside lawyers being delegated to the employer’s manager of employee relations, who was not an attorney. Thereafter, the employer utilized the seemingly flawed form for two years.

The employer seemingly did not challenge the plaintiff’s contention that the extraneous language in the disclosure form may run afoul of the FRCA. However, the employer argued that the “extraneous language … was the result of an inadvertent drafting error that occurred while [the employer] was revising the disclosure to ensure it complied with the FCRA.” In that vein, the employer insisted that such a supposed violation could not have been willful because the manager who communicated with and seemingly obtained approval from the outside firm was a “’non-lawyer’ who ‘was not versed in (or tasked with knowing) the FCRA’s requirements’” and had “received only ‘general’ training on the FCRA in his capacity as a human resource employee.”

California’s Fourth Appellate District (headquartered in San Diego) determined that, “[f]ar from helping [the employer], this evidence tends to establish the existence of a triable issue of material fact concerning willfulness. For instance, a jury could find that [the employer] acted recklessly by delegating all of its FCRA compliance responsibilities to a human resources employee who, by his own admission, knew very little about the FCRA.”  The court added that “[a] reasonable jury could also find that [the employer] was reckless insofar as it failed to provide adequate FCRA training to its employees who bore responsibility for ensuring the company’s FCRA compliance, thus resulting in a statutory violation like the one at issue here.”

One takeaway from this decision is that employers should, whenever possible, use in-house counsel to communicate with outside attorneys when taking steps to ensure compliance with the FRCA (and, ideally, other workplace laws). Of course, not every employer has its own fulltime in-house counsel to carry out such tasks.  In those instances, employers must make sure that the managers who fulfill those duties have received adequate training.