Do You Use Credit History in Your Employment Screening?
If so, read on.
The decision handed down by the 9th Circuit in January, 2017, in Syed v. M-1, LLC addressed a “question of first impression”, meaning that this is new law. The question presented is “whether a prospective employer may satisfy the Fair Credit Reporting Act’s (“FCRA”) disclosure requirements by providing a job applicant with a disclosure that (reads) “a consumer report may be obtained for employment purposes” (and) which simultaneously serves as a liability waiver for the prospective employer and others.” (See 15 U.S.C. § 1681b(b)(2)(A)). (Syed v. M-1, LLC)
From the case summary: “The panel held that a prospective employer violates 15 U.S.C. § 1681b(b)(2)(A) when it procures a job applicant’s consumer report after including a liability waiver in the same document as a statutorily mandated disclosure. The panel also held that, in light of the clear statutory language that the disclosure document consist “solely” of the disclosure, a prospective employer’s violation of § 1681b(b)(2)(A) 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.”
Why does this matter?
Because, in most instances, an employer uses a third party to do credit history checks and the employer uses a form provided by the third party. These forms contain the authorization to do the check (with the employee’s signature as consent), the required disclaimer language, AND the waiver of liability all on the same form. As the employer, it’s your job to know whether the forms you administer are legal.
Check your screening forms. Does it look like Attachment A in Syed? https://cdn.ca9.uscourts.gov/datastore/opinions/2017/01/20/14-17186.pdf
Based on my reading of this case, your credit screening forms now have to be on two pieces of paper and both be signed by the prospective employee. Page one is the authorization and mandatory disclosure language. Page two is the waiver of liability. Or, in the words of the court: “A consumer may authorize the procurement of a consumer report or (emphasis added) waive an employer’s liability, but he may not “authorize” a “waiver.”
There are nuances that go along with this story, such as statute of limitations issues as well as dicta that seems to apply this decision to independent contractors, as well.