Archive for June, 2011

California Supreme Court: state privacy law not preempted by FCRA

June 17, 2011 Leave a comment

Most FCRA defense lawyers, myself included, tend to think of the consumer reporting as something that is exclusively federal:  the FCRA is a federal law, so we assume that lawsuits involving consumer reports present federal questions to be decided by federal courts.

It doesn’t always work that way.  The FCRA does preempt state laws to a significant extent.  But it does not completely preempt them:  states can and do pass laws that supplement the FCRA.  (As I mentioned just last week, Ohio is considering whether to ban the use of consumer reports by employers, something that is permitted by the FCRA).  But even so, we tend to think that federal courts will decide whether a state law is preempted or not.

Confounding this conventional wisdom, the California Supreme Court recently decided a dispute between a California consumer and a California dentist over whether the dentist violated California law when it provided medical records to a debt collector regarding a $600 debt that the consumer had not paid.  (Because the suit was between two state residents and involved less than $75,000, and because case law indicates that state courts are just as able to resolve federal preemption issues as are federal courts, the dispute was heard by California state courts and not by federal courts).

The Court ruled that the FCRA does not preempt the California Confidentiality of Medical Information Act.  This California law went beyond the FCRA and another federal law (HIPAA, involving medical records) and allegedly prohibited the dentist from disclosing the records to the debt collector.  The consumer sued for violations of this California law.  The state trial court and the intermediate state appeals court both held that the California law was preempted by the FCRA.  But the California Supreme Court has just reversed that finding.  We don’t know yet whether the dentist violated the California law – further proceedings in the trial court will decide that question (if the parties don’t settle first).  But we do know that California creditors and debt collectors now have another law to consider when they engage in debt collection efforts.


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Debate continues over using consumer reports when hiring

June 10, 2011 Leave a comment

Since the FCRA was first enacted in 1970, it has been amended on numerous occasions.  Many of those amendments were attempts to address an issue nationally after one or more states had addressed it locally.

The latest of these issues appears to be whether employers should be able to use consumer reports (which can include prior addresses, past credit history, past criminal history, or all of these things and more) when deciding whether to hire someone.

An Ohio legislator has introduced a bill that would ban all Ohio employers from using consumer reports when hiring someone.  The story about his efforts does a nice job of summarizing the arguments for and against such a ban.  On the one hand, advocates for entry-level employees argue that using consumer reports can discriminate against people who have made past mistakes but have turned their lives around.  On the other hand, employers can tell numerous stories in which using an employment report helped them avoid hiring someone who lied on a job application.

My guess is that states will continue to consider such bans.  I doubt that many if any states will impose an outright ban, but a number of states may well limit the ways in which an employer can use consumer reports in making hiring decisions.  If enough states pass enough different laws, the FCRA may well be amended again, so that employers and reporting agencies can follow a national standard instead of a bevy of local rules.

It’s worth noting that this issue seems to be coming up because there is a lot of unemployment these days.  A few years ago, when unemployment was much lower, employers needed people and were willing to overlook negative information in a consumer report.  Now, employers have the luxury of being choosy, and they are exercising that luxury through the use of consumer reports.

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The FCRA applies to searches of online background

June 3, 2011 Leave a comment

Lots of employers use consumer reporting agencies to create background reports about potential employees.  These agencies typically use proprietary databases (sometimes supplemented by courthouse visits and other work) to create a report that can list prior addresses, provide prior criminal history, or indicate prior credit use.

Some employers want to go beyond this and look at a candidate’s internet profile.  Younger job candidates often have an extensive online presence, including a myspace page, a Facebook account, a Twitter account, and/or a blog.  Some of these are innocuous, but some of them indicate habits that employers might not smile on, like binge drinking on weeknights or recreational drug use.

Typically, an employer who wants to check a candidate’s internet profile will just run a Google search using the candidate’s name, look at the first few links that come up, and call it a day.  But a new company called Social Intelligence offers to do that work in a more standardized (and possibly more thorough) way.

Does the FCRA apply to the kind of formal internet background report that Social Intelligence creates?  The Federal Trade Commission has concluded that it does; it recently closed an investigation into Social Intelligence and advised it to ensure FCRA compliance.  Does the FCRA also apply to the kind of informal Google searches that employers do?  For example, must an employer disclose (per FCRA requirements) that it is going to do a Google search about potential employees?  Maybe; maybe not – it probably depends on whether you consider the results of such an informal search to be a “consumer report” as defined by the FCRA.  But it’s interesting to consider.  To be on the safe side, employers should probably make the disclosure in their job applications.

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