Workplace Misconduct Investigations Now Excluded from the Fair Credit Reporting Act

January 5, 2004

President Bush recently signed into law the Fair and Accurate Credit Transactions Act (FACTA), which reauthorizes the Fair Credit and Reporting Act (FCRA) and eliminates third-party misconduct investigations from the FCRA's coverage. The FCRA has, since its inception, applied to the collection and use of personal information for employment purposes. Recent amendments broadly expanded the Act's coverage and required employers using outside investigators to investigate workplace misconduct to comply with cumbersome notification and disclosure requirements.

Employers were, under these amendments, required to notify the accused of the forthcoming investigation and obtain his/her written consent to be investigated. Employers were also required to provide the accused with a complete copy of the investigative report, including witness statements from all adverse witnesses. These requirements were, for the past several years, harshly criticized by employers and investigators alike because they allowed the accused to interfere with the investigative process. They also, by requiring full disclosure of the investigative report, provided the accused ample opportunity to harass or threaten adverse witnesses.

FACTA eliminates these procedural obstacles and corresponding problems by excluding from the Statute's coverage any workplace investigation regarding alleged violations of federal, state or local laws or a company's policies and procedures-in other words, pretty much any employer investigation unrelated to an employee's creditworthiness.

This means employers will now be free to use outside experts to investigate employees without the employee's advance knowledge or consent; however, employers who take an adverse personnel action against an employee (i.e. termination, suspension, etc.) based in part on any investigative report or information will be required to provide the employee with a summary of the nature and substance of the report. The sources of the information, however, need not be disclosed so employee witnesses can now participate in investigations without fear that their statements will automatically be provided to the accused.

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