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Employers Should Remove Liability Waivers from FCRA Background Check Disclosure Forms

Posted Monday, January 30, 2017 6:30 am
Employers face litigation if they include liability waiver language in the Fair Credit Report Act (FCRA) disclosure forms they issue to job applicants prior to third-party background checks.  According to the United States court of Appeals for the Ninth Circuit, a prospective employer's inclusion of waiver language in a disclosure document that, according to statute, should "solely" contain a FCRA disclosure, constitutes a willful violation of that law.
 
In Syed v. M-I, LLC, Sarmad Syed received a FCRA disclosure form from a prospective employer, M-I, LLC, which contained both the statutorily-mandated notice information and a broad release of liability for the prospective employer and third party entities in relation to Syed's background check.  Syed noted the liability waiver and filed suit within the two-year limitations period, alleging that the FCRA disclosure should not have contained a liability waiver in addition to the required credit report information.  After giving Syed leave to amend the complaint to provide additional facts to support the contention that M-I, LLC acted in willful violation of the FCRA, the court ended up dismissing the complaint upon further review, concluding that Syed failed to allege sufficient facts to state a claim.  Syed appealed the decision to the Ninth Circuit, which reversed the district court's dismissal.
 
As a general matter, the FCRA was enacted to ensure fair and accurate credit reporting while protecting consumer privacy.  The statute contains a provision requiring prospective employers to disclose plans to obtain a consumer report for employment purposes, and obtain an applicant's authorization to do so.  Its language establishes that the disclosure form must "solely" contain FCRA notice information.  Employers who fail to comply with FCRA's requirements may be subject to actual damages for cases of negligent violation, and additional damages, including statutory and punitive damages, as well as attorneys' fees for cases of willful violations.
 
In concluding that Syed had pled facts sufficient to state a claim that M-I, LLC committed a willful violation of FCRA, the Ninth Circuit reasoned that the applicable statutory language unambiguously requires that the FCRA notice consist "solely of the disclosure" and cannot be interpreted as allowing the inclusion of a liability waiver as well.  Since Syed's complaint alleged that M-I, LLC included the liability waiver on the FCRA disclosure form, the court concluded that Syed met the burden for stating a claim and reversed the lower court's dismissal accordingly.
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