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FCRA Update: Workplace Investigations and Annual File Disclosures

Recent amendments to the FCRA, known as the Fair and Accurate Credit Transactions Act of 2003 or FACTA, set a new standard for what FACTA calls "employee misconduct investigations." In addition, FACTA says job applicants and employees who have undergone an employment background screening covered by the FCRA may receive a free annual file disclosure from the company that performed the background check.

Workplace Investigations

What is an "employee misconduct investigation"?

This is an investigation conducted by a third-party your employer may hire if the employer suspects you of:

• Misconduct relating to your employment.
• A violation of federal, state or local laws or regulations.
• A violation of any preexisting written policies of the employer.
• Noncompliance with the rules of a self-regulatory organization, that, for example, oversees the securities and commodity futures industry.

Why was this change made to the FCRA?

This section was adopted to make it clear that employers do not have to get permission to conduct a misconduct investigation. Prior to this, FTC staff issued an opinion letter, the so-called "Vail Letter," that said the FCRA applies even when an employee is suspected of misconduct and the employer hires an outside investigator. (Note: California law already includes an exception for workplace misconduct investigations. www.privacyrights.org/fs/fs16a-califbck.htm)

If my employer suspects me of misconduct, what does this mean for me?

It means your employer does not have to give you notice and get your permission to conduct a misconduct investigation. Like other inquiries covered by the FCRA, this only applies if the employer hires an outside party to conduct the investigation.

It also means you will not receive a notice of your rights as others who are subject to a standard employment background check normally would. If, at the end of the investigation, the employer decides to take some action against you, you receive the "adverse action" notice only after the action has been taken.

You will receive only a "summary" of the investigation report, but not the more detailed report that may include sources.

Who will see the investigation report?

The report may be communicated to:

• The employer or its agent.
• Any federal or state officer, agency or department or any officer, agency or department of a unit of general local government.
• Any self-regulatory organization with regulatory authority over the activities of the employer or the employee.
• Others, as is otherwise required by law; or
• A government agency, in accordance with an existing FCRA section that allows a consumer reporting agency to disclose personal identifying information to a government agency.

Can I dispute the findings?

Not under the FCRA dispute procedure. That is because this new section on workplace misconduct investigations was effected by removing this type of investigation from the definition of "consumer report." Thus, the usual protections that apply to a "consumer report" conducted for employment purposes do not apply to workplace misconduct investigations. If you find yourself in this position, you will probably want to seek the advice of an employment law attorney.

Annual File Disclosure

Another new feature of the FCRA allows consumers to get a free copy of their credit report once a year. Final regulations adopted by the FTC set a geographical "rollout" schedule for free credit reports beginning December 1, 2004. The final regulations can be found on the FTC's web site at www.ftc.gov/opa/2004/06/freeannual.htm The schedule for access to free credit reports is also available on the PRC web site: www.privacyrights.org/fs/fs1-surv.htm

FACTA also requires a free annual file disclosure for consumer reports prepared by "nationwide specialty consumer reporting agencies." This refers to companies that compile, maintain files, and issue reports on consumers that relate to:

• Medical records or payments.
• Residential or tenant history.
• Check writing history.
• Employment history.
• Insurance claims.

For job applicants and employees, this means, starting in January 2005, you may receive a free copy of your "file" maintained by a "nationwide specialty consumer reporting agency" that supplies employers with background checks. Before, you could request a copy of your "file" but would have to pay for it.

Now, companies that provide employment background check reports have to, as a minimum, set up a toll-free number that gives you instructions on how to get the information in your "file." Companies may but are not required to also provide access to the free "file" disclosure through a web site address.

Your "file" is not the same as your "report." The "report" is the document the background screening company gives to your employer. The FCRA gives you the right to receive a copy of your "report" directly from the employer," but only if the employer issues an "adverse action" notice. Your "file" is defined in the FCRA as ".all of the information [about you] recorded and retained by a consumer reporting agency regardless of how the information is stored." (FCRA �603(g)) You are entitled to see your "file," whether or not the employer gives the "adverse action" notice.

The FTC has declined to publish a list of national specialty consumer reporting agencies that are subject to this requirement. We will publish a list of these agencies and the toll free number or other means of access as this information becomes available. In the meantime, if you are asked to submit to an employment background check, it is a good idea to ask the employer for the name of the company that will do the check.

Perform a background check

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