Most employers are at least generally familiar with the The Fair Credit Reporting Act (“FCRA”). FCRA protects consumers whose information is disclosed by consumer reporting agencies. In the employment context, FCRA regulates how employers may use “consumer reports” in the hiring process (or during an investigation) and what rights applicants and employees have regarding their use.
 
A consumer report under FCRA is much broader than just a credit report. The FCRA defines a consumer report as “any communication of information bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used, expected to be used or collected for the purpose of serving as a factor in determining the consumer’s eligibility for personal credit or insurance or employment purposes.” As you can tell, the definition is expansive and includes most reports about a consumer. Reports that contain information only about transactions between the consumer and person making the report are specifically excluded, so an employer’s evaluations and/or internal investigation are exempted. FCRA also defines a consumer reporting agency as any person or entity that charges fees for assembling or evaluating consumer credit information or other information on a consumer for the purpose of furnishing consumer reports to third parties.
 
Employers need to be aware of FCRA because many employers use consumer reports, such as credit history reports and background checks, to make important employment decisions. Employees (or potential employees) have several rights as it pertains to consumer reports related to them. Among these rights, the employee must be informed that the employer is seeking this information and obtain the employee’s permission. If the employer decides to take adverse action based on the report, it must provide the employee notice of its planned action, a copy of the consumer report and a copy of their rights under FCRA.
 
FCRA has recently been in the news because potential employees in California brought a case in which they invoked a novel use of FCRA. In Sweet v. LinkedIn, several employers denied jobs to applicants after inquiring about these employees with references the employers had found on LinkedIn. 2015 WL 1744254 (N.D. Cal. 2015). The LinkedIn Reference Search is a subscription service offered by LinkedIn where employers can find people within the employer’s LinkedIn network who may be able to provide feedback about a job candidate. LinkedIn does this by cross-referencing the employment information of the person being searched with other people to determine individuals who may have worked with the person being searched. The plaintiffs in Sweet alleged that the information LinkedIn was providing to employers was a consumer report, thereby making LinkedIn a consumer reporting agency. Accordingly, they alleged that their rights under FCRA had been violated because LinkedIn:

1. Furnished Reference Reports without obtaining certifications that the person seeking the report had notified the consumer that they were seeking this information and would provide the consumer with notice of their rights and a copy of the report if it was used to support an adverse decision;
2. Did not provide User Notices or a summary of the consumer’s rights to those purchasing the Reference Reports;
3. Did not make any effort to verify the identity of those seeking the report and their intended use for the report; and
4. Did not take reasonable procedures to assure maximum possible accuracy of the information in the Reference Reports.

After considering the arguments of both parties, the district court in Sweet dismissed the Plaintiffs’ claims on the following grounds:

1. The information provided by LinkedIn was not a consumer report because it only contained information that came from transactions between LinkedIn and the person being searched because consumers self-provide their information to LinkedIn.
2. LinkedIn is not a consumer reporting agency because it does not gather the information it provides for the purpose of furnishing consumer reports, but collects the information to fulfill the consumer’s information-sharing objective.
3. The list of references provided by LinkedIn does not bear on the character, general reputation, personal characteristics or mode of living of the consumers. It only provides information on people who may have information bearing on these things.
4. Plaintiffs’ claims did not allege that the search results are used or intended to be used to serve as a factor in determining eligibility for employment. Instead, LinkedIn markets the reference search as a means for employers to find people who may have information about job candidates, but not as a tool that in itself will provide reliable information about a candidate

Although the California district court ultimately dismissed the Plaintiffs’ claims, this litigation may very well be a precursor for litigation and law-making to come. In the same way many laws have been revised to account for emails, text messages and other forms of electronic data, Sweet may be a sign of the next wave of social media driven legal change. In the interim, and despite the decision in Sweet, employers should be careful about how they secure references, and those who participate on LinkedIn should remember to comply with their employer’s rules on references.
 
If you have any questions about this issue, or any other employment law issue, please contact our Labor & Employment Practice Group.