Overly Broad Background Check Authorization
Sarmad Syed wanted to work for M-I, LLC. Like many employers, M-I conducts background checks of its prospective employees. Following standard operating procedures, M-I had Syed sign a Disclosure Release. The release allowed M-I to conduct a background check under the Fair Credit Reporting Act. It also contained release of liability regarding M-I using or disseminating the information obtained.
The liability waiver at the heart of the present dispute reads as follows:
I understand the information obtained will be used as one basis for employment or denial of employment. I hereby discharge, release and indemnify prospective employer, PreCheck, Inc., their agents, servants and employees, and all parties that rely on this release and/or the information obtained with this release from any and all liability and claims arising by reason of the use of this release and dissemination of information that is false and untrue if obtained by a third party without verification.
It’s not clear whether M-I hired Syed, but Syed sued M-I claiming including a liability waiver violated the FCRA’s requirement that the disclosure document consist “solely” of the disclosure. 15 U.S.C. § 1681b(b)(2)(A)(i) Syed sought statutory and punitive damages, attorney’s fees and costs. Syed did not seek actual damages, which would have required proof of actual harm.
Background Checks under the FCRA
The Ninth Circuit looked whether “a prospective employer may satisfy the Fair Credit Reporting Act’s (“FCRA”) disclosure requirements by providing a job applicant with a disclosure that “a consumer report may be obtained for employment purposes” which simultaneously serves as a liability waiver for the prospective employer and others.”
The court found that a prospective employer violates Section 1681b(b)(2)(A) when the background check disclosure document includes a liability waiver. The court concluded that the disclosure document must consist “solely” of the disclosure, and a prospective employer’s violation of the FCRA is “willful” when the employer includes terms in addition to the disclosure. Section 1681b(b)(2)(A) unambiguously requires a document that “consists solely of the disclosure.” The statute does not implicitly authorize the inclusion of a liability waiver in a disclosure document. The statute’s explicit language does not allow a liability waiver.
In California, employers cannot obtain credit reports on prospective employees except in certain limited situations. Employers that can obtain credit reports need to follow the disclosure requirements.
Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.
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