Labor & Employment Blog: It's Beginning to Look a Lot Like … Fair Credit Reporting Act Disclosures are Destined to be Alone for Now:

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  • Labor & Employment Blog
    December
    18
    2017

    It's Beginning to Look a Lot Like …
    Fair Credit Reporting Act Disclosures are Destined to be Alone for Now

    Michael J. Gentry

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    The U.S. Supreme Court recently declined to hear a case where the Ninth Circuit Court of Appeals determined that including a waiver with a Fair Credit Reporting Act (FRCA) disclosure may be a willful violation of the law. It’s a good time, says Michael Gentry, for employers nationwide to reassess their FCRA disclosures.

    When someone applies for a new job, his or her prospective employer will typically run a background check on the applicant.

    Michael Gentry Michael Gentry, Marquette 2013, is an associate attorney with Reinhart Boerner Van Deuren s.c., Milwaukee, where he practices management-side labor and employment law, emphasizing on federal and state court litigation, and class and collective action defense.

    In doing so, many employers will utilize third parties that specialize in screening applicants to find the right candidates. They may end up utilizing entities that qualify as "consumer reporting agencies" under the Fair Credit Reporting Act (FCRA).

    The classification is significant; even if the agency the employer entrusts to accomplish the background check is compliant, the employer's own pre-hire documentation also comes under FCRA scrutiny.

    The Fair Credit Reporting Act

    In general, the FCRA requires the following when its protections are triggered:

    1) employers must notify the applicant of the their intent to run the background check (termed a "consumer report" in the FCRA),
    2) employers must get written permission from the applicant before doing so, and
    3) employers must provide rejected applicants with a notice of their rights and instructions about how to correct any incorrectly reported information that the employer received.

    A Solitary Disclosure

    While human resources practitioners and employment lawyers are typically aware of these general requirements, specific questions remain. For instance, can the FCRA disclosure be combined with other documents in order to streamline on-boarding? There is, after all, a significant pile of paperwork that new employees need to fill out and sign when starting a job.

    No. The statute specifies that the disclosure must be "clear and conspicuous" and be in a document "that consists solely of the disclosure."1

    Early in 2017, the Ninth Circuit became the first Circuit Court of Appeals to weigh in on just how solitary the FCRA disclosure must be given this statutory language.

    In Syed v. M-I, LLC,2  the court reversed the dismissal of an applicant's case for failure to state a claim based on an FCRA disclosure that also included a waiver of claims resulting from procuring the consumer report in addition to the FCRA disclosure itself.

    Going further, the court determined that the applicant had stated a claim for a willful violation of the statute, given the FCRA’s unambiguous text which – as cited above – prohibited the employer from including anything with the FCRA disclosure.

    On Nov. 13, 2017, the Supreme Court declined to hear the company's petition for certiorari3, leaving the decision to stand as good law in California, Arizona, Alaska, and Hawaii.

    A Significant Bellwether

    Beyond being a potential circuit court bellwether, the Ninth Circuit's decision is significant. The court's willfulness determination raises the specter of statutory damages and attorney's fees for successful claimants challenging what many employers might otherwise view as a technical requirement of the FCRA.

    'Tis the season for employers to review (and trim the fat off) their FCRA-compliant disclosures.

    Endnotes

    1 15 U.S.C. § 1681b(b)(2)(A)

    2 853 F.3d 492, 503, 2017 WL 1050586 (9th Cir. 2017), cert. denied, 2017 WL 2671483 (U.S. Nov. 13, 2017)

    3 M-I LLC v. Syed, 2017 WL 2671483, at *1 (U.S. Nov. 13, 2017)





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