IN HOUSE INVESTIGATIONS VERSUS THIRD PARTY INVESTIGATIONS UNDER THE FAIR CREDIT REPORTING ACT.

The United States Federal Trade Commission (“FTC”) has issued several Advisory Opinions that sexual harassment investigations conducted by independent outside third parties may be subject to the Fair Credit Reporting Act (“FCRA”) and its disclosure requirements.  Visit the FTC website at www.ftc.gov for a review of all the current Advisory Opinions.  The FCRA, as interpreted by the FTC, requires employers to obtain the consent of the report’s subject, i.e., employee(s) being investigated before procuring the report.   Moreover, a copy of that report must be provided to that individual(s) prior to an adverse action.  In essence, employers must alert an individual(s) that he or she is under investigation, consequently, possibly hampering the effectiveness of the investigation. 

In order to comply with the consent requirement, but to avoid alerting an individual of the current need for an investigation, employers may require all current and prospective employees to provide written consent to the procurement of a consumer report.  Employers must also advise employees, preferably at the time of and contained in the consent form, that they may be subject to an investigation by an independent outside third party. 

Of course, the independent investigator may draft the report in a curtailed manner to avoid specifics damaging to the company.  However, a report being issued in this manner is clearly not as complete and reliable.

Currently, SHRM’s Governmental Affairs Department, headed by Derron Zeppelin, is working with many other management groups to draft language to exempt employment investigations from the FCRA’s coverage.  For the latest exemption proposals, visit the SHRM website at www.shrm.org and the Governmental Affairs section.