Including a Liability Waiver in an FCRA Disclosure Is a Willful Violation: Ninth Circuit | Practical Law

Including a Liability Waiver in an FCRA Disclosure Is a Willful Violation: Ninth Circuit | Practical Law

In Syed v. M-I, LLC, the US Court of Appeals for the Ninth Circuit held that a prospective employer violates the Fair Credit Reporting Act (FCRA) Section 1681b(b)(2)(A) when it obtains a job applicant's consumer report after including a liability waiver in the same document as the required FCRA disclosure.

Including a Liability Waiver in an FCRA Disclosure Is a Willful Violation: Ninth Circuit

by Practical Law Labor & Employment
Law stated as of 25 Jan 2017 • USA (National/Federal)
In Syed v. M-I, LLC, the US Court of Appeals for the Ninth Circuit held that a prospective employer violates the Fair Credit Reporting Act (FCRA) Section 1681b(b)(2)(A) when it obtains a job applicant's consumer report after including a liability waiver in the same document as the required FCRA disclosure.
On January 20, 2017, the US Court of Appeals for the Ninth Circuit held, in a matter of first impression, that a prospective employer violates the Fair Credit Reporting Act (FCRA) when it obtains a job applicant's consumer report after including a liability waiver in the same document as the required FCRA disclosure. The Ninth Circuit also held that given the FCRA's clear language that the disclosure document consist "solely" of the disclosure, a prospective employer's violation is willful when it includes additional terms in the disclosure. ( (9th Cir. Jan. 20, 2017).)

Background

In 2011, Sarmed Syed applied for a job with M-I in 2011. M-I provided Syed with an FCRA "Disclosure Release" that:
  • Informed Syed that his credit history and other information could be collected and used as a basis for the employment decision.
  • Authorized M-I to procure Syed's consumer report.
  • Included a liability waiver stipulating that, by signing the document, Syed was waiving his right to sue M-I for FCRA violations.
In May 2014, Syed filed a class action against M-I in federal district court alleging that:
  • M-I's Disclosure Release did not comply with the requirement in FCRA Section 1681b(b)(2)(A) that the disclosure document consist "solely" of the disclosure.
  • M-1 violated the FCRA by procuring his consumer report having failed to comply with that requirement.
After dismissing Syed's original complaint with leave to amend, the district court considered Syed's amended complaint and again:
  • Concluded that Syed had not sufficiently pled that M-I's statutory violation had been willful.
  • Dismissed Syed's FCRA claim for failure to state a claim but did not grant him a second leave to amend.
Syed appealed.

Outcome

The Ninth Circuit:
  • Reversed the district court's dismissal of Syed's FCRA claim.
  • Held that:
    • M-I violated FCRA Section 1681b(b)(2)(A) by obtaining Syed's consumer report after including a liability waiver in the same document as the required FCRA disclosure; and
    • M-I's FCRA violation was willful as a matter of law.
  • Remanded to the district court.
The Ninth Circuit noted that:
  • The FCRA provides that a prospective employer may not procure a job applicant's consumer report unless:
    • before the report is obtained, a written disclosure is made to the applicant, in a document that consists solely of the disclosure, stating that a consumer report may be obtained for employment purposes (15 U.S.C. § 1681b(b)(2)(A)(i)); and
    • the applicant has authorized, in writing, the procurement of the report (the authorization may be on the same document as the disclosure document) (15 U.S.C. § 1681b(b)(2)(A)(ii)).
  • The FCRA disclosure and authorization requirements are intended to:
    • secure job applicants' privacy rights by allowing them to withhold giving their authorization for a prospective employer to obtain their consumer reports; and
    • ensure accurate credit reporting while promoting correction of any errors in the consumer report obtained.
    (See Safeco Ins. Co. v. Burr, 551 U.S. 47, 52 (2007).)
The Ninth Circuit determined that:
  • Syed alleged more than a "bare procedural violation" and therefore had suffered a concrete injury sufficient to have standing to sue.
  • The text of Section 1681b(b)(2)(A) is unambiguous in providing that the disclosure document must not include other material.
  • The FCRA's allowance of the authorization to be in the same document as the disclosure is not inconsistent because the authorization:
  • No implicit or explicit exceptions allow for the prospective employer's liability waiver to be included with the disclosure.
  • Whether the FCRA disclosure is still "clear and conspicuous" even with the employer's inclusion of a liability waiver is not relevant.
  • M-I's violation of Section 1681b(b)(2)(A) was willful as a matter of law because:
    • its inclusion of a liability waiver in the same document as the disclosure showed that its interpretation of the FCRA was "objectively unreasonable" and therefore at least negligent; and
    • crossed over the "negligence/recklessness line" because the FCRA "unambiguously bars M-I's interpretation."
  • Syed's claim is not time-barred because:
    • the relevant date for FCRA statute of limitations purposes is not the date he signed the disclosure, but when M-I obtained the report, because the violation occurs when the employer obtains the consumer report after having failed to comply with the disclosure procedure; and
    • Syed alleged he was unaware the consumer report was procured until he reviewed his personnel file, and he filed the action within two years of that alleged review (see 15 U.S.C. § 1681p).

Practical Implications

Employers in the Ninth Circuit should make sure that the FCRA disclosure does not include a liability waiver or other information except the required disclosure and authorization. Best practice in other circuits, where the issue has not yet been decided, is to do the same.