FTC Says Fair Credit Reporting Act Applies To Work Harassment Investigations By Outside Firms
January 1, 2000
An advisory opinion issued August 31, 1999, by the Federal Trade Commission
provides guidance to employers on complying with the notification requirements
of the Fair Credit Reporting Act (FCRA) in connection with workplace harassment
investigations conducted by outside investigative firms and attorneys.
As first reported in the September 1999, edition of the Employment Law
Letter, the FTC issued a staff opinion letter in April 1999, in which it opined
that the FCRA, a federal law governing the acquisition and use of "consumer
reports" and "investigative consumer reports," applied to
workplace harassment investigations conducted by outside attorneys and
investigators.
In order to comply with the FCRA's notification requirements, employers must
obtain the written consent of the accused harasser prior to undertaking the
investigation, and must provide the accused a copy of the investigative report
prior to taking any disciplinary action.
In the wake of the FTC's April 1999, advisory opinion, employers and
management attorneys cried foul, claiming that application of the FCRA to
harassment investigations could interfere with employers' efforts to comply with
federal and state antiharassment laws, which generally permit employers to
escape liability for co-worker harassment where they can show that they
conducted an effective investigation and took prompt remedial action once they
received notice of the improper conduct. They protested that, if employers must
abide by the FCRA's notification requirements, employers may be tempted to
forego hiring investigative firms or attorneys to conduct these investigations,
and thus, potentially increase their exposure to liability under antiharassment
laws.
The advisory opinion subsequently issued in August 1999, while reiterating
the FTC's stance that the FCRA applies to workplace harassment investigations
conducted by outside firms and attorneys, provides important guidance on
handling these practical problems.
The FTC instructs that an employee's consent to procurement of a report can
be obtained routinely at the start of employment, "thereby relieving the
employer of the awkward prospect of having to ask a suspected wrongdoer for
permission" to allow a third party to provide an investigative report to
the employer.
The FTC also instructs that employers can meet the disclosure requirements of
the FCRA in a similar fashion, or by asking all current employees to sign a
consent form, and providing them any required notice, at the same time, so as
not to alert a suspected wrongdoer.
To assist an employer who will be required by the FCRA to provide a copy of a
report to an employee prior to adverse action, the FTC notes that the
investigative agency may draft its report to the employer to minimize risks
attendant to such disclosure, most importantly by not naming parties that
provide negative information regarding the employee.
While the notification requirements of the FCRA will remain in tension with
employer obligations under anti-harassment laws, the guidance provided in the
recent FTC advisory opinion should assist employers in meeting their legal
obligations when presented with an employee complaint of harassment.
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