Court Says: Credit Check Rules Do Not Apply to LinkedIn

A federal court recently decided that LinkedIn’s search technology does not make it a “consumer reporting agency” for purposes of applying the Fair Credit Reporting Act (FCRA). As a result, a federal court magistrate judge recently dismissed the claims of a group of individuals who alleged that they were not hired because a potential employer used LinkedIn’s “Reference Search” feature to obtain background information on them.

LinkedIn’s “proprietary search technology” allows users to search the profile data of its members. Part of the search functionality is the Reference Search feature, which allows users to search for “references” for any LinkedIn member.

The Reference Search lists the searched member’s name, along with the names of his or her current and former employers. The Reference Search then provides a list of other members in the same network as the searcher, and those who may have worked at a particular company during the same period as did the searched member.

The Reference Search results encourage searchers to contact the listed references, but does not do this for them; it also does not notify searched members when users run searches on them.

The plaintiffs in the California lawsuit alleged that LinkedIn violated their rights under the FCRA by furnishing information for employment purposes. They sought certification of a class, demanding actual damages, punitive damages, attorneys’ fees, and costs. LinkedIn moved to dismiss the case, arguing that the plaintiffs failed to state a claim under the FCRA.

The federal judge reviewing the case held that the plaintiffs were unable to set forth a right to relief above the speculative level and that they failed to raise facts sufficient to “support a plausible inference that the Reference Searches are within the FCRA’s definition of a consumer report.”

The judge listed four reasons for that holding:

The publications of employment histories of the searched members are not consumer reports because they came solely from LinkedIn’s transactions with these same consumers (that is, the purpose of LinkedIn is for consumers to “share their professional identities online”).
A “consumer reporting agency” regularly assembles or evaluates consumer credit/background information for the purpose of furnishing reports to third parties, whereas, the function of LinkedIn is to “carry out consumers’ information-sharing objectives.”
Because the search results come from people in the searchers’ networks, and not the searched members’ networks, the results do not indicate that the searched member is well-connected in the industry.
LinkedIn does not market the results of the search as a source of reliable feedback about job candidates and, therefore, plaintiffs cannot establish that the results themselves are used or intended to be used to determine a searched member’s eligibility for employment.

While the court made a thorough analysis of the situation, its holding included permission for the plaintiffs to amend their complaint to attempt to come within the parameters of a FCRA cause of action, so we may be seeing more of this issue before it is fully resolved.

The decision highlights the varied and increasing uses of electronic searches, especially as they relate to social media. But the question raised by recent cases in this area is whether the expanded use of electronic search tools will lead to a parallel increase in the regulation of social media, especially as it relates to employment issues.

This article was drafted by the attorneys of Ogletree Deakins, a labor and employment law firm representing management, and is reprinted with permission. This information should not be relied upon as legal advice.