The Integrity News
Vol. XIII No. 1
ISSN 1081-2717
January 16, 2004
The Fair and Accurate Credit Transactions (FACT)
Act of 2003, which amends the FCRA, was signed
by President Bush on 12/4/03.
You can print your own copy of the newly amended
FCRA ( 85 pages long ) by going to the
FTC website.
As a public service, the FTC posted this copy of the
FCRA with it's most recent amendments on 12/18/03.
The new provisions of the FCRA added by the FACT
Act will become effective at different times between
December 31, 2003, and December 1, 2004, depending
on the results of rulemaking proceedings announced by
the FTC and the Federal Reserve Board on December
16, 2003. The effective dates will be made final by the
Commission and Board no later than February 4, 2004.
While most of the amendments from the FACT Act
have to do with Identity Theft, there is one particular
amendment specifically aimed at employers. That
new Section is 603 "(x) -- Exclusion of Certain
Communications for Employee Investigations".
Before being included as Title VI of the FACT Act,
the draft was known as the "Sessions Bill". Its goal
was to enable companies to conduct investigations of
wrongdoing in the workplace "without the inappropriate
application of the FCRA". The investigators and law
firms conducting these investigations did not want to
be Consumer Reporting Agencies (CRAs) as the FCRA
defined them because they found it "difficult" to cope
with the issue of the prior Authorization by the employee.
They felt that the FTC's ruling (the Vail opinion) that
said they needed to have the signed Authorization of
the employee before investigating him or her, was an
"inappropriate" application of the FCRA. They didn't
want to be called to investigate and then be required
to have the subject's authorization. Yet, they did not
want to forge ahead ignoring the FCRA, because of the
significant potential liability, including punitive damages,
for failure to comply with the FCRA. So they lobbied,
and got this exclusion put in the FCRA by the FACT Act.
While we agree that employee wrongdoing should be
investigated, the reason for pointing this out is that
it can expose the employer to other liabilities.
For years The Integrity Center, Inc. has advised clients
to have an Authorization and Release of Liability on file
for EVERY employee that is effective for the life of their
employment. Even very nice employees can do strange
things. With the Authorization on file, if an investigation
is required, the authorization is already in place. Over
the years, The Integrity Center, Inc. has discussed this
with many employers, and procedures for accomplishing
this have been written about and discussed.
The problem with the new amendment is that it applies
to "suspected misconduct". This leaves the door open
for accusations whether they are sincere or ill-meaning.
An unwitting employer may not know the motivation
behind an accusation. In plain English, an investigation
can be initiated if the motivation is a complaint of real
harm -- or merely driven by spite, jealousy, revenge, or
outright manipulation.
The employee being investigated does not have to be
told that an investigation is taking place, and at the
conclusion of the investigation (quoting the new law)
"After taking any adverse action based in whole or in
part on a communication described in paragraph (1),
the employer shall disclose to the consumer a summary
containing the nature and substance of the communication
upon which the adverse action is based, except that the
sources of information acquired solely for use in preparing
what would be but for subsection (d)(2)(D) an investigative
consumer report need not be disclosed."
In other words, an accusation can now be made about an
employee, a secret investigation can be conducted of the
employee without their prior signed Authorization, the employee
can be given an adverse action up to and including
termination, and the employee does not have to be told
who said what at what time, other than the employer shall
disclose to the employee a summary of the "nature and
substance" of the investigative report.
It is important to note that amendment "(x)" has as its first
condition that "but for subsection (d)(2)(D), the communication
would be a consumer report". Section (2) deals with
"exclusions". In other words, this method of operation is
ONLY to be used, as the FACT Act -- Title VI says, for
"Employee Misconduct Investigations". This amendment
does not change an employer's other responsibilities for
having prior written Authorization, with respect to consumer,
or investigative consumer, reports.
It is the opinion of The Integrity Center, Inc., as a risk
management firm, that if employers now adopt this new
procedure for the convenience of their investigators,
rather than take the steps to have an Authorization on
file, that they can be exposing themselves to a whole
new avalanche of law suits.
The Integrity Center, Inc. is not in the business of giving
legal advice. If your company finds itself with the need
to conduct an investigation of an employee, you should
discuss these implications with your legal counsel and
seek his or her advice.
Feel free to call The Integrity Center, Inc. (972) 484-6140
to discuss any of the new amendments.
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