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| CHANGES TO THE FAIR CREDIT REPORTING ACT - CERTAIN INVESTIGATIONS NO LONGER COVERED |
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By Janis E. Susalla Foley and Janelle Schaller Winter 2005
President Bush signed into law the Fair and Accurate Credit Transactions Act (“FACT Act”). The FACT Act reauthorizes the Fair Credit Reporting Act (“FCRA”), and makes a number of changes. One of particular interest to employers is found in Title VI, Section 611, entitled “Protecting Employee Misconduct Investigations.”
Under the FCRA, before seeking a “consumer report” for employment purposes, an employer has to give “a clear and conspicuous disclosure” in writing to the employee before the report is requested or prepared. Before taking an adverse employment action based on the report, the employer is required to provide a copy of the report to the employee along with an explanation of his or her rights under the FCRA. If the employee made a written request, he or she has the right to receive “a complete and accurate disclosure of the nature and scope of the investigation requested.”
The FCRA, to the surprise of some employers, had been construed by the FTC to require notice and disclosure to employees being investigated for possible workplace misconduct. The FTC concluded that “once an employer turns to an outside organization for assistance in investigation of harassment claims . . . the assisting entity is a [consumer reporting agency].” “It would appear that the reports prepared by outside organizations performing harassment investigations for employers are most likely ‘investigative consumer reports’ within the meaning of the FCRA.”
FACT Act Changes
The FACT Act made an important change to the FCRA that allows employers to investigate alleged employee misconduct without needing to follow the steps outlined above. Under Title VI of the FACT Act, “Protecting Employee Misconduct Investigations,” certain communications are specifically excluded from coverage under the FCRA. To be excluded, the communications must be made to an employer in connection with an investigation of suspected misconduct relating to employment. The Act also excludes consumer reports obtained by an employer in compliance with Federal, State, or local laws and regulations, the rules of a self-regulatory organization, or any preexisting written policies of the employer. Excluded communications may not be made to investigate credit worthiness, standing or capacity. The Act also includes restrictions on re-disclosure to be excluded from coverage under the FCRA. If an employer relies upon the report and takes “an adverse employment action based in whole or in part” on a consumer report, however, the employee must be given “a summary containing the nature and substance of the communication upon which the adverse action is based, except that the sources of information . . . need not be disclosed.”
For more information about the FACT Act, see http://thomas.loc.gov/cgi-bin/bdquery/z?d108:h.r.02622
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