HR Magazine: The FCRA and Investigations of Current Employees

Mar 1, 2001

HR Magazine, March 2001Vol. 46, No. 3

Outsourcing Background Checks

While legal experts say the law is fairly clear in how the Fair Credit Reporting Act (FCRA) applies to pre-employment background checks, a swirl of controversy surrounds the law's application to investigations of current employees, especially if misconduct is alleged.

The controversy was prompted by an April 1999 Federal Trade Commission (FTC) staff opinion known as the Vail letter. (The opinion was a response to an inquiry by attorney Judi Vail.) The interpretation suggested that FCRA notice and disclosure procedures must be followed in various types of employee misconduct investigations, including sexual harassment investigations, if the probes are handled by a third party.

The Vail letter states that employers who use a third party to investigate a sexual harassment claim must notify the target of that investigation and, in some cases, must provide sensitive information about the probe.

The FTC has acknowledged the problems the Vail letter poses. But the commission believes the only way to fix the problem is to amend the law.

The Society for Human Resource Management (SHRM) is among a number of employer groups pushing for a legislative change. In congressional testimony supporting a legislative fix, SHRM board chair Michael Lotito noted the Vail interpretation seems to contradict recent Supreme Court rulings, which make it clear that employers must take immediate action to ferret out harassment in the workplace. The FTC's interpretation serves as a disincentive for employers to use outside help in conducting investigations, even though "employees are oftentimes more open and forthcoming with outside investigators because of their objectivity and insulation from internal politics and pressure," Lotito said in his testimony.

Although legislative action stalled last year, SHRM and other groups are renewing a push for clarification in the FCRA statute to allow employee misconduct investigations to go forward unhindered.


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