Under a federal law that requires employers to inform job applicants that they may obtain their credit reports as part of the application process, an employer cannot make applicants sign a release from liability before procuring the report. (Sarmad Syed v. M-I, LLC, No. 14-17186 (9th Cir. 2017). In a case of first impression in the federal circuit, the Ninth Circuit Court of Appeals held that a prospective employer violates the Fair Credit Reporting Act (FCRA) when it procures a job applicant’s consumer report after including a liability waiver in the same document as the disclosure to the applicant.
In amending FCRA in 1996 to require employer disclosure, “Congress was specifically concerned that … employers were obtaining and using consumer reports in a manner that violated job applicants’ privacy rights,” the panel wrote, especially in light of inaccurate information often contained in reports. The law requires an employer to disclose that it may obtain an applicant’s credit report and enables the applicant to withhold authorization or to warn the employer that the report might contain errors.
For a willful violation of FCRA, a consumer may recover statutory damages of up to $1,000, punitive damages, and attorney’s fees and costs. The Ninth Circuit panel held that, in light of the law’s requirement that the disclosure document consists “solely” of the disclosure, an employer’s violation is “willful” when the employer includes in it additional terms before procuring a consumer report.
When Sarmad S. applied for a job with M-I, LLC in 2011, M-I provided him with a release which informed him that his credit history and other information could be collected and used as a basis for the hiring decision, authorized M-I to procure his consumer report, and stipulated that, by signing the document, he was waiving his rights to sue M-I for violations of FCRA. Sarmad’s signature served simultaneously as an authorization for M-I to procure his credit report and as a broad release of liability.
Sarmad claims he realized M-I had violated the Act when he looked in his personnel file and saw that M-I had obtained his credit report in spite of the allegedly unlawful disclosure. In 2014, Sarmad filed a putative class action in district court, seeking statutory and punitive damages. The district court dismissed his complaint on the grounds he had not sufficiently pleaded willfulness on the part of M-I.
In its reversal, the Ninth Circuit held that Sarmad had alleged more than a procedural violation of FCRA. “The authorization requirement creates a right to privacy by enabling applicants to withhold permission to obtain the report from the prospective employer, and a concrete injury when applicants are deprived of their ability to meaningfully authorize the credit check,” the court wrote. “By providing a private cause of action for violations, Congress has recognized the harm such violations cause… .”Super Lawyers named Illinois business trial attorney Peter Lubin a Super Lawyer in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over a quarter of a century of experience in litigating complex class action, copyright, non-compete agreement, trademark, and libel suits, consumer rights and many different types of business and commercial litigation disputes including lawsuits between businesses or between shareholders and owners of the same business. Our Elgin and Wheaton business dispute lawyers handle emergency business lawsuits involving shareholder oppression, business divorces, partnership break-ups, car fraud, copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud. You can contact us by calling at 630-333-0333. You can also contact us online here.