On November 13, 2017, the U.S. Supreme Court declined to hear the appeal of one of 2017’s more significant Fair Credit Reporting Act (FCRA) opinions, Syed v. M-I, LLC. (9th Cir. Jan. 20, 2017). In Syed, the Ninth Circuit Court of Appeals held that a background check disclosure which included a liability waiver violated the FCRA. This case was significant because the Ninth Circuit is the first federal appeals court to definitively state that the FCRA “unambiguously bars the inclusion of a liability waiver.” The court also notably held that the employer willfully violated the FCRA by including the liability waiver in the disclosure, finding that no reasonable interpretation of the statute would allow any language besides a disclosure and authorization.
By way of background, the FRCA prohibits an employer from procuring a “consumer report” (e.g. a background report, credit report, etc.) on an employee or applicant without first providing a clear and conspicuous disclosure in a document consisting solely of the disclosure. FCRA litigation in recent years has primarily involved whether employers’ FCRA disclosure forms improperly included a release of liability or other “extraneous information” that violated the FCRA’s disclosure requirements.
In Syed, the Ninth Circuit agreed with the employee that the employer’s inclusion of waiver of liability language in the disclosure document willfully violated the FCRA. Analyzing the language of the statute and Congressional intent, the Ninth Court found that FCRA disclosure requirements are not met where a document contains any language other than the disclosure and an authorization. The court also reviewed the Supreme Court’s 2016 decision in Spokeo, Inc. v. Robins, but found that the employee in Syed had standing to bring the claim because he had alleged more than a “bare procedural violation” of the FCRA. For more information regarding the Spokeo case and other cases referring to the Supreme Court’s decision in Spokeo, please refer to our prior blog posts on the topic:
- Claim for Violation of Wiretap Act Not a Slam Dunk Under Spokeo
- Supreme Court to Examine Standing Under FCRA
- Unsolicited Call Without Charge Held a Violation of TCPA
In its petition for certiorari to the Supreme Court, M-I argued that the Ninth Circuit incorrectly applied the Court’s holding in Spokeo when it found that Syed had standing to bring his claim under the FCRA. On November 13, the Supreme Court denied M-I’s petition without providing any explanation for the denial. As a result, the Ninth Circuit’s decision in Syed remains good law on both the issue of willfulness and the disclosure requirements under the FCRA.
The Syed decision serves as a warning to employers of the strict approach many courts have taken regarding the FCRA’s disclosure requirements. The Ninth Circuit’s determination that the inclusion of a liability waiver was a willful violation of the FCRA is of particular concern. Under the FCRA, willful violations can result in either actual damages or statutory damages, ranging from $100 to $1,000 per violation, which can result in significant potential liability in class action litigation. There is also the possibility that employers may be hit with punitive damages for willful violations, which is at the court’s discretion.
Employers who obtain background checks from consumer reporting agencies must ensure their forms comply with the FCRA, as well as various state and local laws. Relying on disclosure and authorization forms provided to them by third-party vendors, including credit reporting agencies, is not recommended as such forms may include violations of the technical many provisions of the FCRA. Thus, employers should review their hiring forms with legal counsel to ensure they comply with the FCRA and applicable state and local laws.
We will continue to monitor and report on any further developments in the Syed case as well as any other developments related to the issues decided therein.