Yes, according to a recent opinion letter from the Federal Trade Commission (FTC). Why should you be concerned about compliance with the Fair Credit Reporting Act (FCRA)?
Strategic Decisions Involved In Employment Investigations
Employers have always had a number of strategic issues to consider when beginning an investigation into allegations of employee misconduct: should human resources personnel or a lawyer conduct the investigation? should a written report be prepared? what information should be provided to the alleged perpetrator? The recent opinion letter issued by the staff of the FTC now adds another layer of complexity--should the investigation be conducted by an external or internal investigator? The possible applicability of the detailed requirements of the FCRA to your investigation will hinge on your decision about who conducts the investigation.
Employers frequently rely on external investigators to look into issues such as alleged sexual harassment. The goal is to provide some demonstrable measure of objectivity to the process and its conclusions. The use of external investigators can be of particular importance when the alleged harasser is a high level corporate employee or officer who could arguably exert influence over internal investigators. The FTC staff's recent opinion letter, however, states that when external investigators are called upon to conduct such investigations, they are deemed to be a "consumer reporting agency" under the FCRA (15 U.S.C. §§1681-1681u), and their reports are deemed to be "investigative consumer reports." The determination that an external investigator is a "consumer reporting agency" defies traditional notions of what such an agency is, and includes human resources consultants and law firms.
Requirements Of The FCRA If Applied To Investigations
If FCRA obligations are imposed on external harassment investigations, employer responsibilities towards the target of an investigation would be greatly expanded. Before requesting a consumer investigative report, the employer would be required to (a) provide a written disclosure to the employee stating the intent to conduct the investigation; (b) obtain written authorization from the employee to conduct the investigation; and (c) provide a certification of compliance with these steps to the outside investigators.
Once the report is received, but before an employment decision adverse to the employee is made, the employer would be obligated to (a) send the employee a copy of the investigation report, and (b)advise the employee in writing of his or her rights under the FCRA.
Finally, if the report was used to make an adverse employment decision, the employer would be required to provide the employee with (a) notice of the adverse decision; (b) contact information about the "consumer reporting agency"; and (c) various statements regarding the agency's role in the decision, the employee's rights to his or her agency file, and the employee's right to dispute the accuracy of the information provided.
Impact Of The FCRA On Strategic Investigation Decisions
These FCRA procedures are not only cumbersome, they are also in many respects at odds with employer obligations to conduct a prompt investigation, to keep investigations confidential in an effort to protect the privacy of all concerned, to encourage witness participation, and to minimize opportunities for retaliation. The procedures could also conflict with the attorney client and attorney work product privileges. It is not difficult to envision situations where an investigation is delayed while the alleged harassing employee consults with an attorney or refuses to provide consent, thereby undermining the employer's duty to conduct a prompt investigation. Or, situations where witnesses are reluctant to participate when notified that the alleged harassing employee will receive a full report of the statement of the witness.
The plaintiff's bar has expressed enthusiasm for the FTC staff position and we anticipate that this enthusiasm will result in early demands by the targets of an investigation for reports and investigative documentation. If these demands are not met companies can anticipate claims under the FCRA and common law.
Although this and all FTC staff opinion letters are advisory, and not binding on the state or federal courts, employers should be mindful of this potential for dispute as they plan for investigations into employee conduct. We can expect that over the next few years cases addressing this issue will wind their way through the appellate courts and there will be clarification as to whether it was the intent of Congress to include these sorts of investigations within the scope of the FCRA.
What Can You Do, And How Can Pillsbury Help?
Until there is guidance by the appellate courts there is some risk that the results of an investigation may be made known to the target of the investigation. However, if it is the company's intention to assert the investigation as an affirmative defense, the content of the report will be made public in any event and disclosed in discovery. In this case, use of experienced external investigators to provide the best possible litigation defense may, notwithstanding the FCRA requirements, be the best alternative. Pillsbury employment lawyers have extensive experience in conducting investigations into alleged harassment, discrimination and other alleged misconduct.
The other alternative is to conduct the investigation internally. This would completely avoid the requirements of the FCRA. The appropriate approach to the investigation will depend on the experience level of the investigator, the allegations made and the target of the investigation. Nothing in the FTC opinion letter impacts the ability of companies to obtain legal advice about the scope of an investigation. Consequently, if the decision is made to conduct the investigation internally, we can provide guidance regarding who should conduct the investigation and what steps should be taken. Moreover, if your company personnel have limited experience conducting investigations, or just need some refresher training, our employment lawyers are experienced in providing training on how to conduct effective investigations.