Recently, the issue raised in Sweet v. LinkedIn is whether the Reference Searches functionality offered by LinkedIn is governed by the regulations set forth in the FCRA.  The Reference Search feature allows users who pay a fee to search for references that have worked with any other LinkedIn member.  The results list common employers and other LinkedIn members who are in the same network as the person running the search and the person who is the subject of the search.  When a LinkedIn user runs a Reference Search on a particular LinkedIn member, the Reference Search results provide the user with two different categories of information.

The Court granted LinkedIn’s motion to dismiss Plaintiffs’ complaint on a number of grounds.  The reasons are items that employers need to understand, and provide a good reminder about the FCRA requirements:

1.      Court held that the information being provided by LinkedIn is not a “consumer report.” 

The FCRA defines “a consumer report” as:

[A]ny written, oral or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for . . .

(B) employment purposes; or

(C) any other purpose authorized under section 1681b of this title.

The FCRA provides an exception to this definition, and states that a “consumer report” is not any “report containing information solely as to transactions or experiences between the consumer and the person making the report.”  Because LinkedIn publishes the employment histories of the consumer who are the subjects of the Reference Searches, and this information was provided by the LinkedIn users themselves (i.e., is information obtained by “transactions or experiences” with the consumers) the information provided by LinkedIn is not a consumer report.

2.      The Court held that LinkedIn is not a “consumer reporting agency.” 

A “consumer reporting agency” is defined as “any person which, for monetary fees . . . regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.”

However, the FCRA provides that “[a]n entity does not become a [consumer reporting agency] solely because it conveys, with the consumer’s consent, information about the consumer to a third party in order to provide a specific product or service that the consumer has requested.”  The Court held that this exemption applies to LinkedIn because, “Plaintiffs’ own allegations show that consumers provide LinkedIn with information about their employment histories so that LinkedIn can publish this information online.”

 3.      The Reference Search offered by LinkedIn does not bear on the “character, general reputation, mode of living” or other relevant characteristics to trigger application of the FCRA.

The only information provided by LinkedIn’s Reference Searches function is a list of people who once had a common employer with the subject of the search and who are also in the same network with the person conducting the search.  The Court held that this information is not the type of information that the FCRA is intended to protect.  Indeed, the Court stated that at its essence, the search function only provides a way for the searcher a way to “locate people who might be able to communicate on information about the consumer-subjects of these results, not that this results themselves convey bearing on information.”

 4.      The Court held that Plaintiffs failed to state a claim that the Reference Searches results are used or intended to be used as a factor in determining whether the subjects of the searches are eligible for employment. 

Again, the Court pointed out that the information provided by LinkedIn is only contact information about other people who may be able to provide reliable feedback about job candidates.  Since this LinkedIn does not market this report a source of reliable feedback about job candidates, the FCRA does not apply.

 5.      While the Court granted LinkedIn’s motion to dismiss, Plaintiffs still have an opportunity to cure any defects and file an amended complaint. 

So this probably is not the final analysis of this case.

The case is an important reminder to employers to be aware of the Federal and state laws that apply to background checks on applicants and employees.  Even though this case pertains to LinkedIn’s status under the FCRA, employers need to understand whether or not the background checks they are conducting trigger the FCRA, as the law places requirements on employers who use consumer reporting agencies.

For more information about the FCRA, the Federal Trade Commission and the EEOC published this joint report: Background Checks: What Employers Need to Know.

[Photo: Nan Palmero]