A business best practice is to review your hiring Disclosure Form particularly if you do business in California. Walmart loses appeal on Disclosure Form violations which triggered lawsuits without proving harm.
Background check form errors on disclosure form cost California employers $10,000 per violation, no proof of harm required.
The February 4 decision changes the math on pre-employment screening compliance for California employers. In a case that could affect how companies across the state handle background checks, the Fourth District Court of Appeal said even paperwork errors trigger serious financial penalties.
An employee applied to work at Walmart in June 2018. She got the job offer, passed her background check, and started working as a sales associate. Three years later, she sued over the disclosure form she signed during the hiring process.
The problem was not with what the background check found. The issue was how Walmart told her about it. The company’s 14-page disclosure form listed six different agencies that might run her background check and told applicants to call a hotline to find out which one was actually used. California law says employers must identify the specific agency conducting the investigation right in the disclosure. [R&A Comment – We have a prior blog post here explaining more about Disclosure Forms.]
Walmart argued this was a technical mistake that hurt nobody. The individual got hired. She got a copy of her report. No adverse action was taken against her. The trial court agreed and dismissed the case, saying you need to show actual harm to sue.
The appeals court saw things differently. Under California’s Investigative Consumer Reporting Agencies Act, the court said, the violation itself is enough. The law gives workers a choice: sue for actual damages or collect $10,000, whichever is more. By using the word “any” before actual damages, the court reasoned, lawmakers made clear they were not requiring proof of harm.
The decision dug into the history of the 1975 law. Legislators knew that proving damages from background check violations is nearly impossible. How do you quantify not knowing which agency to contact if your report contains errors? What’s the dollar value of unclear disclosures? The statute was designed to solve this problem by creating a flat penalty that makes compliance worthwhile.
The court pointed out that California’s law is tougher than the federal Fair Credit Reporting Act on purpose. When the state legislature passed the law, it specifically said the goal was more stringent protections than federal rules provided. Over the years, lawmakers increased the penalty from $300 to $2,500 to $10,000, trying to create real consequences for noncompliance.
The practical impact is significant. Walmart’s lawyers mentioned during the case that 141 people have filed similar lawsuits against the company. The court acknowledged this but said concerns about whether $10,000 is too much are questions for legislators, not judges.
For HR departments, the message is clear. Review your background check forms now. Make sure they identify only the specific agency you actually use, not a list of possibilities. Keep the disclosure separate from other hiring paperwork. Strip out any extra language that is not required by law.
The word “solely” means what it sounds like, the court said. A disclosure document should contain solely the disclosure. Five extra agency names do not meet that standard, even if you eventually tell applicants which one you used.
The ruling applies to what California calls investigative consumer reports, which cover information about character, reputation, personal characteristics, or lifestyle obtained through interviews or other means. These are common in employment screening.
This was not a close call for the appeals court. All three judges agreed. The appeals court sent the case back for further proceedings, with the standing question now resolved in Parsonage’s favor.
The decision underscores a broader principle in California employment law. The state creates statutory rights and statutory remedies that do not require traditional proof of damages. The legislature decides what conduct deserves penalties. Courts enforce those choices, even when the penalties seem disproportionate to any obvious harm.
James P. Randisi, President of Randisi & Associates, Inc., has been helping employers protect their clients, workforce and reputation through implementation of employment screening and drug testing programs since 1999. This post does not constitute legal advice. Randisi & Associates, Inc. is not a law firm. Always contact competent employment legal counsel. To learn more about the rights of employees who test positive for marijuana, Mr. Randisi can be contacted by phone at 410.336.0287 or Email: info@randisiandassociates.com or the website at Randisiandassociates.com
