Bureau of Consumer Protection 

Division of Privacy and Identity Protection 

United States of America 

FEDERAL TRADE COMMISSION 

WASHINGTON, DC 20580 

September 8, 2015 

BY FEDERAL EXPRESS AND EMAIL 

Rod M. Fliegel 

Littler Mendelson, PC 

650 California Street, 20th Floor 

San Francisco, CA 94108 

rfliegel@littler.com 

Re: California Health & Wellness, FTC File No. 152-3077 

Dear Mr. Fliegel: 

As you know, the staff of the Federal Trade Commission's Division of Privacy and 

Identity Protection has conducted an investigation into possible violations of the Fair Credit 

Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq., by your client California Health & Wellness 

("CHW"). The investigation considered whether CHW violated the FCRA in connection with its 

screening program for potential employees. 

CHW, a subsidiary of diversified healthcare enterprise Centene Corporation, is a health 

plan based in California that offers healthcare, pharmacy, vision, and transportation services to 

its members. Pursuant to a contract with the California Department of Health Care Services 

("CDHCS"), effective November 1, 2013, CHW serves Medicaid beneficiaries in 19 counties. 

As required by this contract, CHW has established a policy of conducting background checks on 

job applicants. In implementing this policy, CHW obtains a screening report from a consumer 

reporting agency for each applicant it intends to hire. 

To promote the accuracy and privacy of consumer reporting information in the 

employment context, the FCRA imposes notice, consent, and disclosure requirements on 

employers using background checks in making personnel decisions. For example, a potential 

employer must notify a job applicant of its intent to use a background screening report, obtain 

the applicant's consent to obtain the report, and, if it thinks it may not hire the applicant, it must 

provide the applicant with a "pre-adverse action" notice to allow him or her an opportunity to 

review the report and explain any negative information. The company must also provide an 

"adverse action" notice to an applicant who is ultimately denied a job based on information in his 

or her report. 1 These requirements are subject to certain exceptions, including those set forth in 

Section 603(y) of the FCRA, entitled Exclusion of Certain Communications for Employee 

Investigations. Section 603(y) excludes from the definition of"consumer report" 

communications made to an employer in connection with an investigation of "(i) suspected 

misconduct relating to employment; or (ii) compliance with Federal, State, or local laws and 

1 15 U.S.C. § 168lb(b)(2) and (b)(3); see also 15 U.S.C. § 1681m. 
regulations, the rules of a self-regulatory organization, or any preexisting written policies of the 

employer."2 

Among other things, staff's investigation examined the applicability of Section 603(y) to 

CHW's background screening program. Staff also examined CHW's procedures regarding the 

screening of potential job applicants to assess their sufficiency under the FCRA. 

Based on our investigation, we do not view CHW's use ofbackground screening reports 

in the hiring process as falling within the Section 603(y) exclusions. To the contrary, we view 

Section 603(y) as covering only investigations of current employees, rather than investigations of 

both current employees and job applicants. First, the language of Section 603(y) itself 

contemplates an existing employer/employee relationship. For example, the title of the section 

refers to employee investigations, rather than background screening of potential employees. 

Similarly, subsection 603(y)(l )(B)(i) refers to "suspected misconduct relating to employment" 

and subsection 603(y)(l)(B)(ii) refers to "preexisting written policies of the employer," both 

phrases that connote an existing employment relationship.3 That Section 603(y) is a narrow 

exception is bolstered by the legislative history.4 Finally, we note that the FCRA is "undeniably 

a remedial statute that must be read in a liberal manner in order to effectuate the congressional 

intent underlying it." Cortezv. Trans Union, LLC, 617 F.3d 688,722 (3d Cir. 2010). As such, it 

should be broadly construed and its exceptions be narrowly applied. See A.H Phillips, Inc. v. 

Walling, 324 U.S. 490, 493 (1945) (construing narrowly an exception to the Fair Labor 

Standards Act). 

Based upon our review, staff has determined that CHW's procedures are consistent with 

those set forth in the FCRA. Among other things, staffs investigation showed that CHW 

currently notifies job applicants of its intent to use a screening report and obtains an applicant's 

authorization before obtaining this report. CHW further provides applicants with an opportunity 

to review and contest the information in the screening report before making a final personnel 

decision, and, if the company ultimately declines the applicant, sends the applicant an "adverse 

action" notice. 5 

Accordingly, staff has decided not to recommend enforcement action at this time. Our 

decision not to pursue enforcement action should not be construed as a determination that a 

violation did not occur, just as the pendency of an investigation should not be construed as a 

determination that a violation has occurred. The Commission reserves the right to take further 

action as the public interest may warrant. 

2 15 U.S.C. § 168la(y)(l)(B). Even employers who fall within the Section 603(y) exceptions are required to provide 

employees with an adverse action notice. See 15 U.S.C. § 1681a(y)(2); see also 15 U.S.C. § 1681m. 3 Moreover, when read in context with other provisions ofthe FCRA, it is evident that Section 603(y) does not 

extend to the pre-employment background screening context. For example, Section 604(b), which sets forth the 

requirements on employers using background checks on prospective employees, refers to a "person" receiving the 

report, rather than an "employer," indicating a distinction between the two terms. 4 As this history indicates, Section 603(y) was enacted to provide "a narrow technical correction" to the FCRA to 

address concerns that these requirements were undermining the ability of employers to conduct meaningful 

investigations of possible employee misconduct by prematurely alerting employees to the existence of an 

investigation. See 149 Cong. Rec. H8122 (daily ed. Sept. 10,2003, Rep. Jackson-Lee). 5 15 U.S.C. §1681b(b)(2) and (b)(3). 

2 
3 

Sincerely, 

Maneesha 

~~ Mithal 

Associate Director 

Division of Privacy and Identity Protection