Advisory Opinion to Meisinger (08-31-99)

August 31, 1999

Ms. Susan R. Meisinger
Society for Human Resource Management
1800 Duke Street
Alexandria, Virginia 22314

Dear Ms. Meisinger:

Chairman Pitofsky has asked me to respond to your letter dated June 23, 1999, which sets forth your view that practical problems exist in applying the Fair Credit Reporting Act ("FCRA") to reports made to employers by third parties they hire to investigate allegations of sexual harassment or other workplace misconduct.

The cause of your concern is a staff opinion letter (Vail, 04/05/99) that states that a report to an employer by an investigative agency may be an "investigative consumer report" as defined in Sections 603(e) of the FCRA. If a report to an employer is a consumer report, the FCRA requires employers to obtain the report subject's consent before procuring the report, and make certain disclosures (which may include providing a copy of the report itself) to that individual. The staff opinion letter is an analysis of current law in response to a request for our interpretation of the terms of the FCRA as enacted by Congress.

We appreciate and are sympathetic to the practical problems that exist in applying the FCRA to investigations by third parties of workplace misconduct, enumerated in your June 23 letter. Of course, when Congress enacted its FCRA reforms in 1996, it could not have foreseen the two 1998 Supreme Court cases referenced in your letter. Prior opinion letters by our staff addressed some of the problems you note, and sought to help employers comply with the FCRA where it applies to reports they obtain from third parties.(1)Thus, we pointed out that an employee's consent to procurement of a consumer report, required by Section 604(b)(2)(A)(ii), can be routinely obtained at the start of employment, thereby relieving the employer of the awkward prospect of having to ask a suspected wrongdoer for permission to allow a third party to provide an investigative (or other) consumer report to the employer (Brisch, 06/11/98;James, 08/05/98). Employers seeking to obtain reports on employees can meet the disclosure requirements of 606(a)(1) and 604(b)(2)(A)(i) in a similar fashion (Brisch, 06/11/98). Another way for an employer to comply with these FCRA requirements without alerting a suspected wrongdoer is to ask all current employees to sign a consent form, and provide them any required notice, at the same time (James, 08/05/98). To assist an employer who will be required by Section 604(b)(3)(A)(i) to provide a copy of a report to an employee prior to adverse action,(2) an investigative agency may draft its report to the employer to minimize risks attendant to such disclosure, most importantly by not naming parties that provide negative information regarding the employee (Hahn, 07/08/98).

Section 621(a)(4) specifies that the Commission is not permitted to issue rules or other regulations with respect to the FCRA. Therefore, any changes or exceptions must come from Congress. However, when the staff is asked to interpret the statute, we respond by informal letters as we did to Ms. Vail. We also do our best to assist affected parties to comply with the FCRA, as we did in that letter and in correspondence to others cited above. Please take this letter in the same spirit, and feel free to call on me if you have further questions about the FCRA.

Copies of the letters (also found at www.ftc.gov) cited above are enclosed.

Yours truly,

David Medine

Enclosures

cc:

The Honorable James Jeffords

The Honorable William Goodling

The Honorable Ida Castro

Endnotes:

1. We have also emphasized to employers that the FCRA does not apply to investigations they conduct themselves through their own personnel (Pickett, 07/10/98). Similarly, the FCRA would not apply where the employer uses a third party that does not "regularly engage" in preparing such reports and thus does not fall under the definition of "consumer reporting agency" set forth in Section 603(f).

2. The Vail letter makes it clear that the FCRA specifies no fixed "waiting period" that an employer must observe prior to terminating an employee for workplace misconduct based in whole or in part on a consumer report.