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Your Release of Liability May Cause Liability

November 15th, 2014 | Sterling

Class action plaintiff attorneys have had recent success in bringing lawsuits against high profile companies for alleged violations of the Fair Credit Reporting Act (FCRA) requirement that a job applicant receive a consumer report disclosure in a document that “consists solely of the disclosure”.   Many of these class action lawsuits surround the inclusion of “extraneous information”, such as a “release of liability”.  

In many legal documents, the inclusion of a release of liability has no meaningful downside.  It’s simply included in the document to either discourage an individual from suing you or to prevent them from winning if they do sue.  While this generally poses no risk to the party that includes a release of liability disclaimer in most legal documents, that has not been the case for those choosing to have such a statement in a FCRA regulated disclosure form.

Unlike many legal documents, the disclosure form is subject to the technical violations provision within the FCRA.  The mere presence of any information beyond what is absolutely necessary can put your company at risk of a class action lawsuit.  Uniquely, plaintiffs who bring an action based on this type of extraneous information are not required to show that they have been harmed in some way, but just show that the additional information violated the technical requirements of the FCRA.

The penalties for violating the FCRA are $100 to $1,000 per individual violation, plus potential claims for injunctive relief, punitive damages, civil penalties and attorney fees.  Class action attorneys have been targeting large employers for this type of technical violation and are receiving multi-million dollar settlements.  To understand your company’s potential exposure for a technical violation, multiply $1,000 by the number of applicants that have had a background check performed in the past five years (five years is the maximum applicable statute of limitations for FCRA claims).

In addition to the class action lawsuits for including a release of liability in the disclosure document, other class action lawsuits have been brought for:

  • Including the disclosure as part of a printed employment application.
  • Including a question on the disclosure inquiring whether the applicant has been previously convicted of a crime.
  • Failure to use the term “consumer report” in the disclosure.
  • Including information that employment is an “at-will” employer.

In short, the words in your disclosure matter.  Be sure that your disclosure consists solely of the disclosure with no extraneous information.  Have your legal representatives regularly review this form to be sure that it is compliant with the FCRA and does not contain any additional language beyond the disclosure.   If there is any employment related information that you wish to communicate to an applicant, be sure that it is on a document other than the disclosure.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.