Compliance and Legislation, disclosure, FCRA

Ninth Circuit Rules that Disclosures Containing Waivers Violate the FCRA

For the past 5 years, backgroundchecks.com has reported rulings of district courts around the country that have ruled that an employer’s inclusion of a liability waiver or other extraneous information in a disclosure violates the Fair Credit Reporting Act’s (“FCRA”) disclosure requirements found in §604(b)(2)(a). Now, for the first time, a federal court of appeals has weighed in on the disclosure requirement. 

In Syed v. M-I, LLC, the court held that “in light of the clear statutory language that the disclosure document must consist ‘solely’ of the disclosure, a prospective employer’s violation of the FCRA is ‘willful’ when the employer includes terms in addition to the disclosure, such as the liability waiver here, before procuring a consumer report or causing one to be procured.”

This ruling is important for two reasonsFirst, an opinion by an appellate court is binding on all of the district courts in that circuit. Therefore, all federal courts in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington must follow the ruling of this case. Other courts across the country may also choose to follow the ruling, but are not required to.  Second, this case stands for the point that any employer who includes a liability waiver in its FCRA disclosure has willfully violated the law and the plaintiff does not need to prove anything else to win his case.

The Court explained that the FCRA’s disclosure requirement is clear – it must be in a document that “consists solely of the disclosure.” Solely means “alone; singly” or “entirely; exclusively.”  It continued by saying that no reasonable person could conclude that the provision allows the inclusion of a liability waiver.  The FCRA’s employment disclosure provision “says what it means and means what it says” and “inclusion of a liability waiver in the statutorily mandated disclosure document comports with no reasonable interpretation” of §604(b)(2). Finally, the court ruled that because the statute is not subject to a range of plausible interpretations, the employer acted in reckless disregard of its statutory duties.

Because the court has ruled that the employer violated the FCRA as a matter of law, the plaintiff and the class he represents are entitled to statutory damages in the amount of $100 to $1000 each. The case will be remanded to the district court to decide the appropriate amount of damages.

What this update means to you:

  • CHECK YOUR DISCLOSURES TODAY.
  • Your FCRA disclosure document (1) should include nothing more than a statement that you intend to obtain a consumer report for purposes of establishing eligibility for employment; (2) should not include any extraneous language, including liability waivers; (3) should not be included in a document with disclosures of other rights or obligations, such as those mandated by state law; (4) should not be in the same document or online screen as the general employment application; and (5) should be on a separate piece of paper from the authorization.

The full opinion may be found here: Syed v. M-I, LLC, No. 14-17186, in the 9th Circuit Court of Appeals, https://cdn.ca9.uscourts.gov/datastore/opinions/2017/01/20/14-17186.pdf

backgroundchecks.com's previous reporting on court cases involving the FCRA’s disclosure obligation may be found here: http://www.backgroundbiz.com/compliance/compliance-updates.asp#lawsuitsanddecisions

Michael Klazema

About Michael Klazema The author

I am part Marketing Technologist, Product Owner and Innovation Accelerator. I can help organisations with two challenges:

  1. How to move from an organically grown martech stack and a loose set of innovation initiatives to a state which synchronizes a customer focused strategy with a well thought out governance structure and strategy for marketing technology and innovation initiatives. I specialize in predicting which technology trends will more quickly than expected pass the peak of inflated expectations and provide opportunity for value creation and competitive differentiation.
  2. How to define the right organizational structure like a lab, Center of Excellence or Shared Service Center for enterprise wide Personalization, Next Best Action, Customer Engagement or Marketing Automation programs and select teams and technologies to scale such programs more rapidly.

I am experienced in managing traditional and agile marketing and software development teams as well as running user experience, design thinking, conversion rate optimization, experimentation and digital innovation and transformation programs.

Both on the agency and client side I have led product teams through functional site enhancements, site redesigns, software selection, martech platform introductions, and software re-platforming exercises.

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