On April 5, 1999, the Federal Trade Commission (FTC) issued an opinion letter regarding sexual harassment investigations and the Fair Credit Reporting Act ("FCRA"). The FTC opined that employers which use an outside organization to investigate sexual harassment claims must comply with the FCRA's requirements. A copy of the letter can be obtained on the Internet at www.ftc.gov/os/statutes/fcra/vail.htm.
The FCRA governs the use by employers of consumer reports and investigative consumer reports for employment purposes. The FCRA defines an investigative consumer report, in part, as a report containing information about an individual's character, general reputation, personal characteristics, or mode of living which is used or expected to be used as a factor establishing the individual's eligibility for employment.
Before using such a report, an employer must notify the individual in writing that a report may be used and it must obtain the individual's written authorization. Before taking adverse action based on a consumer report, an employer must give the individual a pre-adverse action disclosure form that includes a copy of the report and a description in writing of the individual's rights under the FCRA.
After an employer takes adverse action against an individual based on a consumer report, the employer must provide the individual with the following information: (1) the name, address, and phone number of the consumer reporting agency that furnished the report; (2) a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the individual the specific reasons why the adverse action was taken; and (3) a notice of the individual's right to obtain a free copy of the consumer report from the consumer reporting agency within 60 days and the individual's right to dispute with the agency the accuracy or completeness of any information contained in the consumer report.
In its April 5, 1999 opinion letter, the FTC determined that "once an employer turns to an outside organization for assistance in investigation of harassment claims . . . the assisting entity is a [consumer reporting agency] because it furnishes 'consumer reports' to a 'third party' (the employer)." Consequently, employers that use investigative reports provided by an outside organization "have certain obligations under the FCRA to notify employees and/or supply a copy of the report to the employee." We believe that the FTC would take the same position if the workplace investigation were based on matters other than sex harassment, such as embezzlement, etc. However, it is not clear whether the individual entitled to notice is the complaining employee, the alleged harasser or both.
Some employers have opted to contract out their human resources functions, including workplace investigations, to outside companies or consultants. Employers who conduct their own sexual harassment investigations do not have to comply with the FCRA. The FTC's April 5, 1999 opinion letter makes it necessary to keep the FCRA in mind when using outside companies or consultants for workplace investigations. The FTC further opined that the report could not be edited for the employee to exclude privileged communications when the outside investigator is an attorney or law firm.