In recent years, the Fair Credit Reporting Act (FCRA) has become the focus of increasing litigation.  By way of background, FCRA regulates consumer reporting agencies (CRAs) that assemble or evaluate “consumer reports” for employers on the “character, general reputation, personal characteristics, or mode of living” of prospective and current employees.  In the course of furnishing consumer reports to employers, CRAs must comply with specific disclosure, certification, and notice requirements.

A few months ago, we blogged about Sweet v. LinkedIn Corporation, a FCRA class action filed in the Northern District of California. The Plaintiffs in that case alleged that LinkedIn, of all companies, is a CRA that violated certain disclosure, certification, and notice requirements under FCRA in the course of running Reference Searches for prospective employers. The plaintiffs also claimed that they lost employment opportunities as a result of LinkedIn providing the results of the Reference Searches to their prospective employers.

LinkedIn’s Reference Search is a fee-based service that provides the search initiator with a list of former employers for a given LinkedIn member/potential employee.  The service also provides a list of LinkedIn members within the search initiator’s network who worked at the same companies during the same time periods as the job seeker, from whom the search initiator can solicit “honest” references without the potential employee’s knowledge.

The district court dismissed the Plaintiffs’ complaint on several grounds, holding that:

• Reference Searches are not consumer reports because they are generated from information provided by the Plaintiffs themselves and given to LinkedIn for the express purpose of sharing and publishing the information.  As such, the Reference Searches flow solely from LinkedIn’s “transactions or experiences” with the Plaintiffs—a category of information expressly excluded from the meaning of a consumer report;

• Reference Searches also are not consumer reports because the information generated from such searches do not bear on the “character, general reputation, mode of living and other relevant characteristics” of the Plaintiffs.  Rather, the Reference Search merely lists individuals who once shared a common employer and are within the network of the search initiator;

• The allegations against LinkedIn also do not establish that the company is a CRA. LinkedIn obtained the names and employment histories used to generate the Reference Searches through the voluntary participation of its members for the purpose of fulfilling their information sharing goals, not for the purpose of preparing a consumer report; and, finally,

• The Plaintiffs failed to demonstrate that the Reference Searches were used or intended as a factor in determining their eligibility for employment, as the results themselves do not provide any feedback about a job candidate’s eligibility for employment.  By way of analogy, the Court noted “the fact that a potential employer could use a telephone directory for a job candidate’s current employer to contact people who know the candidate does not make that directory a consumer report.”

This decision is a positive development not only for LinkedIn, but for employers who utilize LinkedIn in the course of vetting prospective and current employees.

The court has allowed the Plaintiffs until May 19, 2015 to file an amended pleading to cure the defects in their complaint.  Stay tuned to see what happens …