Employment Practices Loss Prevention Guidelines - Chubb Group of ...

Congress recently amended the FCRA to largely exclude third-party
investigators from the statutory reporting obligations. Effective January 1,
2004, the FCRA was amended to exclude from its requirements
communications from outside consultants, including attorneys, made to
employers in connection with an investigation of 1) suspected misconduct
relating to employment or 2) compliance with federal, state, or local laws
and regulations; the rules of a self-regulatory organization; or any preexisting
written policies of the employer. An investigation involving information
relating to an individual’s credit worthiness, credit standing, or credit
capacity is, however, still subject to the FCRA’s notice and consent
provisions.
In exchange for not having to give prior notice of, and get consent for,
workplace misconduct investigations, the FCRA as amended does impose
certain requirements. First, any workplace investigation report can be
disclosed only to the employer; federal, state, or local agencies; officers of
departments; any organization with regulatory authority over the employer;
or as otherwise required by law. Of course, most employers would so limit
any disclosure of such a report due to fear of liability for libel and slander.
Additionally, if an employer takes adverse action based in whole or part on
the report, the employer must disclose to the target employee of the
investigation a summary of the communications on which the adverse action
is based. The summary must include the nature and substance of the
communications, but need not include sources of information, such as the
identity of individuals who have been interviewed.
In addition to federal law, some states restrict background checks. California
and New York, for example, prohibit employers from obtaining information
about an applicant’s arrests if the arrest did not result in a conviction. Other
states prohibit credit-reporting agencies from reporting arrests or convictions
that are more than seven years old. Thus, an employer must be careful in
such states to specify that it does not want information on such arrests
included in any investigative reports.
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