An employer hires an outside investigator to examine allegations of employee misconduct.  Is the employer required to obtain permission from the employee who is the subject of the investigation?  The Federal Trade Commission previously took the position that reports by investigators were subject to the Fair Credit Reporting Act (“FCRA”) and that employers had to obtain employee written consent prior to obtaining a report and provide a full copy of the report to the employee.  Employers objected to this interpretation of the law because they felt that obtaining consent would tip off the employee to an investigation.  Indeed, the FCRA imposes numerous obligations on employers who obtain “consumer reports” and “investigative consumer reports” on current employees or applicants.

Thankfully, the Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”) amended the FCRA to clarify the obligations imposed on employers who retain outside firms to investigate issues of workplace misconduct.  The FACT Act amends the FCRA to exempt from the definition of a consumer report/investigative consumer report any report that otherwise would fall within that definition if: (1) the communication is made to an employer in connection with an investigation of (a) suspected misconduct relating to employment, or (b) compliance with federal, state, or local law, the rules of a Self-Regulatory Organization (such as the New York Stock Exchange or National Association of Securities Dealers), or any pre-existing written policies of the employer; (2) it is not made for the purpose of investigating creditworthiness; and (3) it is not provided to any person except (a) the employer or its agent, (b) the government, (c) an SRO, or (d) as required by law.  Thus, employers seeking to utilize outside investigators to investigate workplace misconduct do not have to provide advance notice to an employee, obtain his or her prior consent, or disclose the contents of the investigator’s report prior to taking adverse action.  Note that California already has an exception for workplace misconduct investigations; under the Investigative Consumer Reporting Agencies Act (“ICRAA”), California requires notice and permission “at any time an investigative consumer report is sought for employment purposes other than suspicion of wrongdoing or misconduct.”  Civil Code §1786.16(2).

The FACT Act, however, does require that after taking adverse action based in whole or part on such an investigative report, the employer must give the employee a summary of the nature and substance of the report.  Sources of information need not be disclosed in the summary.  In addition, under California’s ICRAA, the employee who was suspected of misconduct is entitled to a copy of any public records reviewed during the investigation (1) after the investigation is completed and (2) if he or she did not earlier waive the right to a copy of the records.

This blog is presented under protest by the law firm of Ervin Cohen & Jessup LLP.  It is essentially the random thoughts and opinions of someone who lives in the trenches of the war that often is employment law–he/she may well be a little shell-shocked.  So if you are thinking “woohoo, I just landed some free legal advice that will fix all my problems!”, think again.  This is commentary people, a sketchy overview of some current legal issue with a dose of humor, but commentary nonetheless; as if Dennis Miller were a lawyer…and still mildly amusing.  No legal advice here; you would have to pay real US currency for that (unless you are my mom, and even then there are limits).  But feel free to contact us with your questions and comments—who knows, we might even answer you.  And if you want to spread this stuff around, feel free to do so, but please keep it in its present form (‘cause you can’t mess with this kind of poetry).  Big news: Copyright 2012.  All rights reserved; yep, all of them.

If you have any questions regarding this blog or your life in general, contact Kelly O. Scott, Esq. (who else would you contact?), commander in chief of this blog and Head Honcho (official legal title) of ECJ’s Employment Law Department, at (310) 281-6348 or kscott@ecjlaw.com.