In Syed v. M-I, LLC, an applicant applied for a position and, as part of the application process, he completed a document entitled “Pre-Employment Disclosure Release.” The document incorporated language simultaneously authorizing the employer to obtain a consumer report and also releasing potential claims under the Fair Credit and Reporting Act (FCRA). Soon after signing the document, the applicant commenced a putative class action alleging that inclusion of the liability waiver in the same document as the disclosure statement violated the FCRA which requires, among other things, that the disclosure document consist “solely” of the disclosure.
In its opinion, the Ninth Circuit explained that the FCRA expressly states that before obtaining a consumer report for employment purposes, an employer must disclose its intent to secure a consumer report for employment purposes and inform the consumer of his/her rights under the FCRA. Those disclosures must be made in a document that consists “solely of the disclosure.” The employer must also obtain the consumer’s authorization to procure the report, and the authorization can be on the same document as the disclosure.
Siding with the plaintiffs, the court held that including a waiver of potential claims language in the same document as the statutorily required FCRA disclosure was a violation of FCRA. In sum, the Court ruled that the FCRA rights notice cannot be combined with any other notice or agreement. It must be a stand-alone document. In determining that the violation was “willful,” the Court held that the “ordinary meaning of ‘solely’ is alone; singly or entirely; exclusively.” As such, the employer’s violation of the Act was willful because “where a party’s action violates an unambiguous statutory requirement, that fact alone may be sufficient to conclude that its violation is reckless, and therefore willful.” A willful finding is significant because under FCRA, willful violations allow for the recovery of fines, punitive damages, and attorney’s fees, while negligent violations permit only actual damages
Although this case is controlling only in the Ninth Circuit (covering Alaska, Arizona, California and Hawaii), all employers who perform background checks should carefully review their FCRA disclosure forms to ensure they include only the statutorily required disclosure and permitted authorization form. Inclusion of any other language, as held in Syed, could be deemed a willful violation of FCRA.
As always, please feel free to contact your HR Business Partner if you have any questions.