March 8, 2017Client Alert

Ninth Circuit Opinion Puts Employers in the Crosshairs

In a recent opinion, the Ninth Circuit considered a question of first impression among the federal courts of appeal: whether a prospective employer satisfies the Fair Credit Reporting Act’s (FCRA’s) disclosure requirements by providing a job applicant with a disclosure that a credit report may be obtained for employment purposes, which simultaneously serves as a liability waiver for the prospective employer and others.

The FCRA states that if a prospective employer wants to obtain a credit report for a prospective employee, the employer must provide a clear and conspicuous written disclosure in a document that consists solely of the disclosure. The employer must also obtain the prospective employee’s authorization to obtain a credit report in writing, and the authorization may be contained in the disclosure.

In Syed v. M-I, LLC, Syed brought a class action suit against M-I for using a disclosure that included a liability waiver for M-I and PreCheck, Inc., a service provider used by M-I. Syed argued the disclosure violated the FCRA’s requirement that the disclosure document consist solely of the disclosure. The Ninth Circuit agreed, holding that the FCRA’s requirement that the document consist solely of the disclosure was unambiguous, and the only exception Congress authorized was the inclusion of the prospective employee’s authorization.

Given the FCRA’s unambiguous requirement, the Ninth Circuit held that inclusion of the liability waiver was objectively unreasonable, and therefore, M-I’s non-compliance was willful. This is significant because a willful violation results in a plaintiff’s ability to recover statutory damages, punitive damages, and attorney fees and costs.

Based on this opinion, we anticipate that plaintiffs’ attorneys will bring more of these cases both within and outside of the Ninth Circuit. Clients should contact legal counsel to review the FCRA disclosures they provide to prospective employees to ensure they comply with the FCRA and the Ninth Circuit’s opinion in Syed.

back to top