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Legal Updates & Alerts

Company Violated the Fair Credit Reporting Act (FCRA) By Including a Liability Waiver with the Required FCRA Disclosure

January 30, 2017
By Lindsay Reynolds
 
The Fair Credit Reporting Act (FCRA) allows companies to obtain background information or "consumer reports" for both prospective and current employees. However, it imposes restrictions on the procedure for obtaining reports, and the use of this information in making credit and employment decisions. These restrictions are designed to ensure fair and accurate credit reporting and to protect consumer privacy.
 
In Syed v. M-I, LLC, a job applicant filed a class action case alleging that the company violated FCRA's requirement that a written disclosure document must consist solely of the disclosure language. Here, the company provided the applicant with a FCRA "Disclosure Release" that: (a) informed the applicant that his credit history and other information could be collected and used as a basis for the employment decision; (b) authorized the company to procure the applicant's consumer report; and (c) included a liability waiver stipulating that, by signing the document, the applicant was waiving his right to sue the company for FCRA violations. On January 20, 2017, the Ninth Circuit concluded that the company willfully violated FCRA by including the liability waiver in the same document as the required FCRA disclosure.
 
Action Items

Companies should review their background check policies and forms to ensure compliance with FCRA, and any state and local laws governing the procurement of background checks and consumer reports for job applicants and/or current employees. In light of Syed v. M-I, LLC, be sure that your FCRA disclosure form is a stand-alone document and does not include a liability waiver or any other information except the required disclosure language.
 
Oregon employers also must remember to comply with state and local "Ban the Box" rules when issuing background check disclosure and authorization forms. Recall that the state rule prohibits employers from inquiring about criminal convictions on employment applicants, prior to an initial interview, or if no initial interview is held, then prior to making a conditional offer of employment. The Portland ordinance is stricter, and prohibits most Portland employers from inquiring about an applicant's criminal history or conducting a background check on an applicant until after a conditional offer of employment has been made.
 
Click here for more information on "Ban the Box" rules. 

This client update is prepared for the general information of our clients and friends. It should not be regarded as legal advice. If you have any questions regarding this update, or for more information about this topic, please an attorney in our Labor & Employment practice group, or the attorney with whom you normally consult.