A subsidiary of oil field services company Schlumberger Ltd. violated the FCRA by placing a liability waiver on its job application disclosure form to force applicants to waive potential claims against the company.
On an issue of first impression, the US Court of Appeals for the Ninth Circuit said while employers must inform a job applicant that the company will perform a background check in the hiring process, the form cannot include a provision waiving the applicant’s rights to sue for any information found in the background check.
In its decision, the Ninth Circuit said the company had willfully violated the statute, opening it up to the Plaintiff’s petition for both statutory and punitive damages.
This is the first time a federal appeals court decided this issue under the FCRA, which is intended to protect employees over concerns about potential errors in consumer reports that can improperly cause applicants to lose out on jobs.
There’s an important lesson for employers here. “The court’s conclusions that an employee who wasn’t actually harmed by the form still has standing to sue and that the company can be sued for a willful violation are surprising,” said Angela Kleine, an attorney who represents financial companies in FCRA matters. The FCRA imposes statutory penalties of $100 to $1,000 per willful violation, so damages could really add up if thousands of applicants received the same form and are potential class members, she said.
This decision is another reminder that employers must review their hiring paperwork and processes to ensure compliance with the FCRA. These matters are not taken lightly by the courts. The more documentation an employer puts into the disclosure form, the greater the legal risk. A waiver is a particular hot-button item that would draw a court’s attention. The inclusion of an employer waiver of liability in a document intended to warn an applicant that background information may be sought is at odds with the statute’s protective purpose, the court said.
Syed v. M-I, LLC , 2017 BL 16499, 9th Cir., No. 14-17186, 1/20/17