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Employer’s liability waiver violated background check law

Posted On: Jan. 24, 2017 2:34 PM CST

An employer that provided a job applicant with a background check disclosure and consent form at the same time as a liability waiver violated the Fair Credit Reporting Act, says the first appellate court ruling on this issue.

Sarmad Syed applied for a job with Houston-asked M-1 L.L.C., a hydrocarbon equipment manufacturer, in 2011, according to Friday’s ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in Sarmad Styed v. M-1 L.L.C. et al.

He was asked to sign a “pre-employment disclosure release” that stated his credit history and other information could be collected and used as basis for the employment decision and authorized M-1 to procure his consumer report.

The release also said that by signing the document, he was waiving his rights to sue the company and its agents for violating the FCRA.

Mr. Sayed filed sued against the company in a putative class action, charging that including the liability waiver violated a statutory requirement under the FCRA that the disclosure document consist “solely” of the disclosure.

The U.S. District Court in Sacramento, California, dismissed the case for failure to state a claim, but a unanimous three-judge panel reinstated it.

“We hold that a prospective employer violates (a section of the FCRA) when it procures a job applicant’s consumer report after including a liability waiver in the same document as the statutorily mandated disclosure,” said the ruling. 

“We also hold 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,” said the ruling.

The FCRA’s employment disclosure provision “says what it means and means what it says,” said the ruling in quoting another opinion and remanding the case for further proceedings.