In a case that went before several district courts, as well as an appellate court in 2016, an individual, Sarmad Syed, went up against M-I, LLC, a Delaware Limited Liability Company and PreCheck, Inc., a Texas Corporation. Syed’s counsel filed an appeal to reverse a district court’s dismissal of their complaint, which argued that a liability waiver included in a statutorily mandated consumer report disclosure violates the Fair Credit Reporting Act (FCRA). The district court’s dismissal was because Syed and his counsel could not support their allegation of “willfulness” in the employer’s violation of the FCRA, which is necessary for the court to order the employer to pay damages.
The panel of judges at the appellate court held that a prospective employer is willfully violating the FCRA when obtaining a job applicant’s consumer report after including a liability waiver in the same document as the job applicant’s statutorily mandated disclosure. This is because of the FCRA’s requirement for the “clear and conspicuous” disclosure document to consist “solely” of the disclosure. The only exception to this requirement (which is, in fact, encouraged by Congress) is for the inclusion of an authorization statement and place for the applicant to sign, approving the procurement of their consumer report. The court found that there were no additional, implied, exceptions to the “solely” requirement, considering this express exception.
This decision sets a precedent, wherein employers violating the FCRA’s disclosure requirements may be required to pay out large class action settlements. Willful violations of the FCRA can result in actual or statutory damages, ranging from $100 to $1,000 per violation, which can add up quickly in class action litigation, especially if the court orders additional punitive damages.
Another point of note on this case is the explicit reason why the FCRA was found to be willfully violated. A prospective employer is not violating the FCRA simply for placing a liability waiver on the same page as a disclosure statement; the employer violates the FCRA when, after violating the disclosure requirement, it “procure[s] or cause[s] to be procured” a consumer report about the applicant. This means if your applicant was given a disclosure document with a liability statement, but you have not yet procured a consumer report on the applicant, you still have time to give the applicant an amended disclosure statement, sans the liability clause.
All forms that employers use for procuring background checks from consumer reporting agencies (CRAs) such as AAA Credit Screening are under an obligation to ensure their forms comply with the FCRA, as well as any other relevant state or local laws. AAA Credit Screening has made a commitment to keep all our disclosure and applicant forms up-to-date with any FCRA requirements. If you are unsure if your consumer report disclosure document is violating the FCRA, try using our form here.
For more information, please visit our website at www.hrbackground.com, or give us a call at 888-282-0447 to reach the friendly staff at AAA Credit Screening Services.