Think Before Hiring Outside Agency to Investigate Harassment

Issue:In response to an employee’ssexual harassment complaint, your company hired a consulting firm to investigatethe charges. You chose an outside consultant to ensure objectivity in theinvestigation, since a high-level manager was the target. The manager beingaccused of sexual harassment now insists that he is entitled to a copy of theinvestigative report prepared by the consulting firm. Is he right?

Answer: Yes, according to theFederal Trade Commission (FTC), since the investigation report falls within thescope of the Fair Credit Reporting Act (FCRA). The FTC has concluded that anemployer who hires an outside organization to investigate a sexual harassmentclaim must follow FCRA procedures because:

1. An outside firm performing a harassment investigation onbehalf of an employer is a “consumer reporting agency,”

2. The report would most likely be an “investigativeconsumer report,” and

3. Violations requiring corrective or disciplinary actioncould reasonably be defined as an adverse employment decision.

Whatdoes the FCRA require?
Under theFCRA, in order to obtain a copy of a third party’s investigative report, an
employer must certify to the consumer reporting agency that:

·   The employer has conspicuously disclosed to applicantsor employees, in writing, that a credit report may be sought. (Note that thisdisclosure has to be in a document separate from any other document.)

·   Information from the report will not be used inviolation of any federal or state equal opportunity law or regulation.

·   Written authorization has been obtained from employeesor applicants.

Moreover,before taking any adverse employment action based on the credit report, theemployer must provide to the applicant or employee a copy of the report plus awritten summary of consumer rights under the Consumer Credit Reform Act.Adverse action means a denial of employment or any other decision foremployment purposes that adversely affects any current or prospective employee.

Whatcan employers do?
Acknowledgingits approach could create some “practical problems,” the FTC has offered theserecommendations:

Routinelyobtain consent at start of employment.
An employee’s consent to obtaining a consumer report, required by law, can beroutinely obtained at the start of employment, relieving the employer of theawkward prospect of having to ask a suspected wrongdoer for permission to allowa third party to provide an investigative (or other) consumer report to theemployer.

Routinelymake disclosures at start of employment.
Employers seeking to obtain reports on employees can meet the disclosurerequirements in a similar fashion.

Askall current employees to sign a consent form and provide required notice, allat once.
Another way for an employer to comply with these FCRA requirementswithout alerting a suspected wrongdoer is to ask all current employees to signa consent form, and provide them any required notice, at the same time.

Conductinvestigations internally.
FCRA does not apply to investigations employers conduct themselves throughtheir own personnel. Similarly, the FCRA would not apply where the employeruses a third party that does not “regularly engage” in preparing such reportsand thus does not fall under the definition of “consumer reporting agency.”

If youmust provide a copy of a report prior to adverse action, don’t name parties whoprovided investigative information.
To assist an employer who will be to provide a copy of a report to an employeeprior to adverse action, an investigative agency may draft its report to theemployer to minimize risks attendant to such disclosure, most importantly bynot naming parties that provide negative information regarding the employee.

Takeadverse action contemporaneously with providing copy of report.
Note that the FCRA specifies no fixed “waiting period” that an employer mustobserve prior to terminating an employee for workplace misconduct based inwhole or in part on a consumer report.

Cites: FTC Informal Staff Opinion Letterof August 31, 1999, Division ofFinancial Practices, Bureau of Consumer Credit Protection, David Medine,Associate Director of Financial Practices; FTCInformalStaff Opinion Letter of April 5, 1999, Division of FinancialPractices, Bureau of Consumer Credit Protection, Christopher W. Keller,Attorney.

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Theinformation contained in this article is intended to provide useful informationon the topic covered, but should not be construed as legal advice or a legalopinion.