California Employment Screening

The federal Fair Credit Reporting Act, 15 U.S.C. §1681 et seq., (FCRA) governs the acquisition and use of most background information on applicants and employees when used for employment purposes. “Employment purposes” are defined in the FCRA to include hiring, termination, reassignment, or promotion of an applicant or employee. In addition to the requirements of the FCRA, California has two statutes that impact on the employment screening process: the California Consumer Credit Reporting Agencies Act (CCRAA), Cal. Civ. Code § 1875.1 et seq., and the California Investigative Consumer Credit Reporting Agencies Act (ICRAA), Cal. Civ. Code § 1786 et seq.

The ICRAA does not explicitly identify the scope of its coverage. We have found nothing in that statute, however, which suggests that the notices and disclosures it requires were intended to apply to consumers other than those with a California mailing address.

The CCRAA, which comprises the Title of the California Civil Code immediately preceding the CRAA, expressly states that the notices and disclosures to consumers provided for in that title need be made "only to those consumers who have a mailing address in California." CCRAA § 1785.6. A similar interpretation of the scope of the ICRAA would be consistent with the Legislature's stated intent in enacting the ICRAA; that is, "to regulate investigative consumer reporting agencies … in a manner which will best protect the interests of the people of the State of California." ICRAA § 1786(g).

We note that one could also make the opposite argument; that is, the absence of language in the ICRAA limiting the scope of its coverage to consumers with a California mailing address, arguably could indicate a legislative intent that the ICRAA statute would have broader applicability than that expressly stated in the CCRAA.

On balance, we believe that the most likely interpretation is the former, and that the notice and disclosure requirements in the ICRAA are intended to apply only to consumers with a California mailing address. This conclusion is not only consistent with the Legislature's stated intent to protect California citizens, but it is also reasonable and consistent with the general operation of other state consumer protection statutes.

With that said, however, it is important to understand that there is very little case law available at this time that specifically addresses this complex issue. For employers wishing to comply with the most restrictive state laws on a uniform nationwide basis, it is safest, at a minimum, to comply with the laws of the states where:

• The individual investigated resides;
• The consumer reporting agency ("CRA") is incorporated or has its primary place of business;
• The employer requesting the report is incorporated;
• The employer has its principal place of business; or
• Otherwise where the employer receives and actually uses the report for employment purposes.

This information is intended for informational purposes only and is not to be considered legal advice. Please realize that no publication can anticipate all individual situations and questions that may arise. If you have questions concerning your legal rights and obligations under state or federal consumer reporting laws, or any local laws or regulations governing the acquisition and use of applicant and employee information, please consult with your experienced employment law counsel.