The U.S. Ninth Circuit Court of Appeals recently ruled against an employer who included a waiver of liability in the same document that contained a disclosure statement required by the Fair Credit Reporting Act (FCRA).
Employers who conduct criminal background or credit checks of job applicants must comply with the FCRA whenever a third-party company is used to gather the information.
The FCRA requires a specific disclosure statement to be provided to an applicant if a third-party background check is being conducted. While the law allows this disclosure statement to be combined with the required authorization by the applicant, the document cannot include any other provisions. In ruling against the employer, the court also stated that the employer’s conduct was “willful” because the statute is so clear and unambiguous about prohibiting the waiver provision. The employee had sued on behalf of a class of all other applicants who had been subjected to the employer’s violation of the FCRA. The ruling means that each member of the class may be awarded punitive damages up to $1,000 plus payment of the plaintiff’s attorney fees and costs (Syed v. M-I, LLC, 9th Cir, Jan. 2017).
Tips: Carefully review your processes and forms before using a third party service to conduct pre-employment background checks. The FCRA has very specific requirements which must be scrupulously followed. In addition to the disclosure and authorization requirements, there are specific written notices which must be provided to applicants whenever the employer intends to take into consideration adverse information from the background check. Further, employers in Oregon and Washington are generally prohibited from conducting credit checks of applicants, except in very limited circumstances, although these restrictions do not apply to criminal background checks. For more information, check out the Vigilant Legal Guides, “Background Checks: Simple Third-Party Reports”, “Background Checks: Federal Notices”, and “Background Checks: California Notices”.
This website presents general information in nontechnical language. This information is not legal advice. Before applying this information to a specific management decision, consult Vigilant or legal counsel.