Standing Alone: Appeals Court Defines Limits On Disclosure Forms for Background Checks

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08/23/2017

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Standing Alone: Appeals Court Defines Limits On Disclosure Forms for Background Checks

 By: Jacquelyn E. Larson

The Ninth Circuit Court of Appeals became the first court of appeal to rule on issues pertaining to pre-employment background checks class actions brought under the Fair Credit Reporting Act (“FCRA”). 

In Syed v. M-I, LLC, the Court ruled that disclosure and authorization forms signed by a prospective employee cannot also contain a waiver of liability. Under the FCRA, prospective employers cannot obtain background checks on their applicants unless the prospective employer provides a written disclosure and obtains written authorization. The FCRA also contains penalties for violating the Act. A prospective employee can sue for any damages, and also can obtain penalties ranging from $100 to $1,000, punitive damages, and attorney’s fees and costs if the violation is found to be willful.

In Syed, the prospective employer included a waiver releasing the employer of any and all liability for alleged FCRA violations on the same page as the disclosure and authorization form. However, the FCRA specifically states that the disclosure document must consist “solely” of the disclosure. The only exception is that the authorization can be on the same page.

The Ninth Circuit held that the FCRA was unambiguously clear that the disclosure and authorization are the only two things allowed on the disclosure form, and the prospective employer’s choice to include the waiver of liability was a violation of the FCRA. The Court also found that since the FCRA was so clear, the prospective employer’s choice to include the waiver was so unreasonable that it was a willful violation of the law, exposing the prospective employer to penalties under the FCRA.

Additionally, the Ninth Circuit held that an alleged violation of the FCRA’s requirement is sufficient to establish standing. As a result, it is not necessary for a plaintiff to establish that the alleged violation resulted in a concrete harm in order to bring a class action lawsuit under the FCRA.

COUNSEL TO MANAGEMENT:

Employers who wish to obtain a pre-employment background check on their prospective employees must follow the letter of the FCRA. This means that any disclosure form cannot include a waiver of liability.  Prospective employers are also cautioned against including any other extraneous information on the disclosure form (except an authorization) in light of the Syed decision.  Failure to comply with the FCRA’s requirements could result in a prospective employer facing a costly class action lawsuit.  If you have any questions about this issue and what it may mean for your company, please contact The Saqui Law Group.

 

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