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The Old-Fashioned Reference Check in a Digital World

By: Teeka Harrison

Among other things, the Fair Credit Reporting Act (“FCRA”) regulates how credit agencies operate and how employers use consumer reports to vet job applicants.  The Plaintiffs in Sweet, et al. v. LinkedIn Corporation, No. 3:14-cv-04531 (N.D. Cal.), seek to apply the strict FCRA notice and reporting requirements to LinkedIn, based upon prospective employers’ use of LinkedIn to obtain the identities of potential references for job applicants.  This novel theory has far reaching implications for employers nationwide; fortunately, the Sweet court ruled that, as pled, the theory has no basis in law.

The Plaintiffs in Sweet claim to have lost job opportunities due to prospective employers who allegedly checked references through LinkedIn, without notifying the Plaintiffs or obtaining their consent.  Each of the Plaintiffs connected on LinkedIn with an employee of a prospective employer, usually an internal recruiter.  Once so connected, the prospective employer allegedly identified and contacted one or more of its mutual connections with the applicant for a reference, by using a proprietary search offered by LinkedIn.

Granting LinkedIn’s motion to dismiss without prejudice, the Court found that the Plaintiffs failed to plead facts plausibly establishing that the LinkedIn reference information is a “consumer report” and that LinkedIn is a “consumer reporting agency.”  The Court found that LinkedIn’s reference information was not pled to be a consumer report because the information is not obtained from third-parties, it is not covered by the FCRA (in that the information does not “bear on” the applicants’ character, reputation, or mode of living), and the information, alone, is not the basis for employer hiring decisions.  The Court found that LinkedIn was not pled to be a consumer reporting agency because its purpose is not to make consumer reports and furnish them to third-parties.  Plaintiffs, however, were permitted leave to file an Amended Complaint.

Employers should closely monitor Sweet and other cases seeking to apply the FCRA to social media that may be used to vet job candidates.  If LinkedIn and the reference information it provides is found to be covered by the FCRA, then its disclosure and consent requirements may apply to employers that use such information to vet job applicants.  Although neither of those outcomes is likely given the purpose and structure of the FCRA and given the types of information covered by the FCRA, proactive employers may reduce the risk of litigation and potential liability by amending existing FCRA consent forms to include the fruits of social media.

Employers might also consider refraining from viewing applicants’ social media accounts when vetting candidates.  Unrelated to the Sweet case but noteworthy for employers are the rules under FCRA, as amended by the FACT Act, for proper “disposal” of consumer information, which includes backgrounds checks that employers may use.  Despite these rules, employers must stay cognizant of federal and state law requirements for record retention and must not immediately destroy documents in an effort to comply with FCRA.  For example, the OFFCP and the ADEA each have applicant record-keeping requirements.  Government, private, for-profit, and non-profit employers are all subject to FCRA’s rules, which apply for all types of applicants, including prospective interns, contractors, and volunteers.