Federal Trade Commission Says Harassment Investigations Are Subject to Fair Credit Reporting Act
September 1, 1999
A recently issued advisory opinion by the Federal Trade Commission (FTC) may
have a dramatic effect on the manner in which workplace harassment claims are
investigated. In a staff opinion letter issued in April, the FTC opined that
lawyers or other outside entities which investigate workplace harassment claims
on behalf of their clients are subject to the provisions of the Fair Credit
Reporting Act (FCRA), 15 U.S.C. §1681 et seq.
The FCRA is the federal law governing the acquisition and use of
"consumer reports" and "investigative consumer reports" for
credit and employment purposes. Under the FCRA, "consumer reporting
agencies" that prepare "consumer reports" or "investigative
consumer reports" must comply with the strict dictates of the Act.
The FTC opined that investigators retained by employers to conduct workplace
harassment investigations can constitute "consumer reporting agencies"
under the FCRA because they assemble or evaluate information on consumers for
the purpose of furnishing "consumer reports" or "investigative
consumer reports" to third parties.
Just as the outside investigators may be subject to the provisions of the
FCRA, the advisory opinion emphasizes that employers who hire outside
investigators to conduct harassment investigations are subject to the
requirements imposed by the FCRA on entities obtaining "investigative
consumer reports."
This advisory opinion presents a number of potential problems for employers
who retain outside counsel or organizations to conduct their workplace
harassment investigations. For one, it places a potential obstacle in the path
of employers' efforts to comply with federal and state anti-harassment laws.
These laws generally permit employers to escape liability for co-worker
harassment where they can show they took prompt remedial action, that is, action
reasonably calculated to end the harassment, once they received notice of the
improper conduct. Conducting an effective investigation into the harassment
allegations to ascertain what corrective or disciplinary action is appropriate
is typically an integral and critical part of the employer's defense of these
claims. Many employers have turned to outside counsel or organizations with
expertise in this area to conduct these investigations. Indeed, reliance on
outside investigators may be required where the department or person otherwise
designated to receive and investigate reports of harassment is implicated in the
charge.
Employers may be tempted to shy away from hiring outside organizations or
attorneys to conduct these investigations if, as a result, they will be subject
to comply with and be liable under the FCRA. Investigators or employers who
violate the FCRA may be subject to administrative enforcement action and civil
liability.
Whether courts will follow the interpretation of the FTC on this issue
remains to be seen. FTC opinions, while not binding on courts, may be considered
in interpreting the FCRA because they reflect the statutory interpretation of
the federal entity responsible for enforcement of the Act. Until this issue is
resolved by the courts, employers need to consider the ramifications of hiring
outside attorneys or organizations to conduct their harassment investigations.
For more information, please call Robert Crohan at 1-888-688-8500.
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