Introduction
On February 4, 2026, the California Court of Appeal, Fourth Appellate District issued its ruling on Parsonage v. Wal-Mart (2026). The key issue in this case was whether a consumer must establish they suffered a concrete injury to recover the Investigative Consumer Reporting Agencies Act’s (ICRAA) statutory penalty of $10,000, or whether a mere violation of the statute is sufficient. The Court held that the plain language of the ICRAA authorized consumers to recover the statutory penalty as a remedy for a violation of their statutory rights, without any further showing of injury.
The Court reasoned that to construe ICRAA as requiring a plaintiff to show concrete injury, such as downstream adverse consequences, would go against the Legislature’s goal in making the ICRAA a more protective piece of legislation for consumer rights than the Fair Credit Reporting Act (FCRA), given that the ICRAA was intended to remedy shortcomings of prior versions of the FCRA.
Background Checks Generally
Employment background checks in California are subject to comprehensive regulations under both federal and state law, ensuring that the process is conducted in a fair and transparent manner that respects the applicant’s privacy rights. Employers must comply with all relevant state and federal laws when conducting a background check on a prospective employee, and employers are required to obtain applicants’ consent before conducting a background check. Relevant laws that pertain to background checks include the Fair Credit Reporting Act, applicable federally, and the Investigative Consumer Reporting Agencies Act in California.
The Fair Credit Reporting Act
The Fair Credit Reporting Act regulates the collection and use of information gathered by a consumer reporting agency (CRA), including an employer’s use of such information for making employment decisions. Consumer reports and investigative consumer reports are generally subject to the requirements of the FCRA.
Under the FCRA, the employer requesting a consumer report must notify the applicant or employee being evaluated in writing that they are requesting a consumer report for employment purposes. This must be a standalone document, and the disclosure itself must be clear and conspicuous. The employer must then obtain the applicant’s written authorization for the procurement of the report. Additionally, the employer must certify to the CRA that the information from the consumer report will be used for employment purposes and that the information will not be used in violation of any applicable federal or state equal employment opportunity laws or regulations. If an employer intends to reject an applicant from a job based on information obtained in the report, they must provide the applicant with a copy of the report received from the CRA and a written notice of their rights under the FCRA prior to rejecting that applicant.
California Investigative Consumer Reporting Agencies Act
The California Investigative Consumer Reporting Agencies Act is intended to ensure fairness and regulate background checks for employment, insurance, and housing purposes that investigate a person’s character, general reputation, or mode of living. Under the ICRAA, an employer may not obtain an investigative consumer report for employment purposes unless they comply with the ICRAA’s consent and disclosure requirements. The Act states that the employers must be seeking to obtain the consumer report for employment purposes, provide a written disclosure to the consumer, and obtain the written authorization of the consumer. This written disclosure that the consumer is to receive must be clear, conspicuous, and in writing. A consumer must be notified of the scope of the investigation, provided with a summary of their rights, and given a copy of the records if their employer wishes to take adverse action based on the information, and this must all be in writing.
The ICRAA prohibits investigative consumer reporting agencies from including criminal convictions in reports if the conviction predates the report by more than seven years—however, this may be overridden by state laws requiring employers in certain sectors to conduct criminal background checks and consider such information. This period of seven years is measured from the date of disposition, parole, or release, whichever is later. The FCRA imposes no such timing requirements.
Impact on Employers
Employers must comply with the requirements set out in both the FCRA and ICRAA. Under the FCRA, employers have an obligation to provide a clear and conspicuous disclosure in a standalone document before procuring a consumer report, and this cannot be done without the individual’s written consent. Under the ICRAA, if an employer intends to procure an investigative consumer report, they must notify the individual in writing, disclose the nature and scope of the investigation, and provide the option for the individual to request a copy of the report. Employers should be aware that per Parsonage v. Wal-Mart, employees need not suffer a concrete injury or an adverse employment action, the violation of their statutory rights is enough to establish standing under the ICRAA. If a violation is successfully established, employers will be liable for damages. Further, per the statute itself, employees are entitled to the greater of the $10,000 or any actual damages they are able to prove, meaning employers are liable for a minimum of $10,000 for each applicant/employee whose background check was not in compliance with ICRAA. This means compliance with consumer reporting laws should be a major area of focus for employers.
Need More Information?
The experienced lawyers at Palmer Kazanjian Wohl Hodson are ready and able to answer your legal questions, recommend best practices, and help your business comply with these requirements. We are happy to provide guidance to clients who would like to support their employees in this way and ensure compliance.