employees criminal background checks

Federal Fair Credit Reporting Act Does Not Preempt State Law.

Under the federal Fair Credit Reporting Act (FCRA), an agency may report a person’s prior conviction to a prospective employer no matter how long ago it occurred. However, under California’s Investigative Consumer Reporting Agencies Act (ICRAA) and the California Consumer Credit Reporting Agencies Act (CCRRA), an agency is prohibited from reporting a “conviction of a crime that, from the date of disposition, release, or parole, antedate the report by more than seven years.” Generally, a state can offer greater protection to a consumer than the federal government.

Sometime in 2011, R. Kemp (Kemp) was convicted of a crime and released on December 11, 2011 on parole. In December 2014, Kemp’s parole ended.

In March 2020, Amazon offered Kemp a job in Sacramento, pending a background check. The consumer reporting agency, Accurate, provided Amazon with a report, which included information about Kemp’s 2011 conviction. As a result, Amazon withdrew its offer of employment.

Kemp filed a class action lawsuit against Accurate alleging Accurate (1) violated the ICRAA, (2) violated the CCRAA, and (3) violated of the state’s Unfair Competition Law (UCL). Accurate moved to dismiss the case, arguing that the federal FCRA preempted Kemp’s state ICRAA claim. Accurate also argued that the phrase “from the date of parole” in the ICRAA refers to the end of parole. The trial court denied Accurate’s motion as to the parole issue but granted the motion as to the preemption issue. The parties appealed.

The Court of Appeal explained the statutory framework of the ICRAA and the CCRAA. Both statutes were modeled after the FCRA and were intended to serve complementary, but not identical, goals as the federal statute. The ICRAA and CCRAA have similar purposes to ensure consumer reporting agencies “exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.” Under the ICRAA, a consumer report is a report bearing on a consumer’s character and general reputation. Under the CCRA, a consumer credit report is a report bearing on a consumer’s credit worthiness, credit standing, and credit capacity. Under the FCRA, there is no distinction between the two types of reports.

Because the information in the two reports overlap, the ICRAA and the CCRAA may apply to the same report. Under the ICRAA and the CCRAA, agencies are prohibited from reporting “records of arrest, indictment, information, misdemeanor complaint, or conviction of a crime that, from the date of disposition, release, or parole, antedate the report by more than seven years.”

The Court of Appeal rejected Accurate’s argument that the phrase “from the date of parole” means the date of the end of parole. The Court of Appeal explained under California law, the parole date, or the date of parole, refers to the date of an inmate’s release, or the start date of their parole. In other words, the period of parole begins when an inmate is released from prison. Therefore, the ICRAA and CCRA prohibit an agency from reporting a person’s criminal conviction that predates a report by more than seven years as measured from the start date of parole, and not the end of parole. The Court of Appeal also examined past policy guidance by the Federal Trade Commission, which enforces the FCRA. The guidance stated that the seven year reporting period runs from the date of parole, and if a consumer is convicted of a crime and sentenced to confinement, the date of release or placement on parole controls. While the guidance is not controlling, the Court of Appeal did find it informative interpreting the ICRAA and the CCRA.

The Court determined that Kemp went on parole in 2011, which predated Accurate’s 2020 report by more than seven years in violation of the ICRAA and CCRA.

The Court of Appeal also rejected Accurate’s argument that the FCRA preempts the ICRAA. The Court of Appeal found the FCRA expressly preempts state law in the statute itself: The FCRA states that it preempts (1) state consumer reporting statutes if the state law took effect after September 30, 1996, and (2) when the state statute regulates the disclosure of convictions in consumer reports. Here, the ICRAA was enacted in 1975. Therefore, the ICRAA did not take effect after September 30, 1996, and is not expressly preempted in the FCRA.

Moreover, the Court of Appeal held that the ICRAA does not conflict with the FCRA. State law is only preempted if it is in direct conflict with federal law such that compliance with both is impossible, because the state law impedes the purposes of Congress. Here, a consumer reporting agency can comply with the ICRAA by not reporting a consumer’s conviction that predates an investigative report by more than seven years without violating the FCRA, which allows for, but does not require, the reporting of such convictions. The ICRAA’s prohibition against reporting convictions older than seven years is not an obstacle to the purposes and objectives of Congress; rather, it is entirely consistent with the consumer protection goals of the FCRA. And as the Court of Appeal noted, the ICRAA was modeled after the FCRA.

Kemp v. Superior Ct. of Orange County (Cal. Ct. App. Dec. 22, 2022) 2022 WL 17843980.

Note:

This case is a reminder that private K-12 schools, colleges, and universities should establish reasonable procedures to ensure compliance with the FCRA and the ICRAA, even when using a vendor to perform background checks, to avoid potential liability.