Detect and Deter-performing Workplace Investigations on Behalf of Employer-clients

• Publication year: 2005
• Pages: 67
• Citation: Vol. 34 No. 2 Pg. 67

34 Colo.Law. 67 Colorado Bar Journal 2005.

2005, February, Pg. 67. Detect and Deter-Performing Workplace Investigations on Behalf of Employer-Clients

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67

Vol. 34, No. 2, Pg. 67

The Colorado Lawyer
February 2005
Vol. 34, No. 2 [Page 67]

Specialty Law Columns
Labor and Employment Review
"Detect and Deter" - Performing Workplace Investigations on Behalf of Employer-Clients
by Mark J. Flynn

This column is sponsored by the CBA Labor Law Forum Committee to present current issues and topics of interest to attorneys, judges, and legal and judicial administrators on all aspects of labor and employment law in Colorado

Column Editor

John M. Husband of Holland & Hart LLP in Denver - (303) 295-8228, jhusband@hollandhart.com

About The Author

This month's article was written by Mark J. Flynn, Denver, an attorney with Mountain States Employers Council, Inc., where he is manager of workplace investigations - (303) 223-5313, mflynn@MSEC.org.

This article outlines the federal Fair Credit Reporting Act coverage exclusion for attorneys retained by employers to conduct employee misconduct investigations. The article also addresses privilege concerns in this context and proposes recommendations for conducting workplace investigations.

Employers often conduct internal workplace investigations in the context of alleged unlawful discrimination or harassment, as well as for other forms of misconduct. An appropriate workplace investigation supports an employer's responsibility to prevent and correct employee misconduct. An employer's good faith defense to avoid punitive damages in these situations depends on its consideration of all the relevant facts and effective corrective action.1 This process begins with a prompt, unbiased, and thorough investigation of the matter to support the making of informed decisions.

In many situations, employers are well advised to seek the support of a third-party investigator. Attorneys and other professionals may assist in investigating a matter to underscore attention to objective fact-finding where allegations of misconduct implicate upper management or the allegations might be publicized. In other situations, the need to maintain the availability of regular counsel in the event of future litigation promotes using an outside attorney to perform an internal workplace investigation.2 In addition, the simple lack of an available experienced internal investigator often prompts the need to engage a third party.

This article provides information for attorneys who perform workplace investigations for employer-clients, as well as attorneys advising employer-clients regarding the performance of internal workplace investigations. It gives an overview of the federal Fair Credit Reporting Act ("FCRA") coverage exclusion for attorneys who conduct employee misconduct investigations. In addition, the article addresses privilege concerns in that context and provides guidance on conducting workplace investigations.

Legal Background

In late 2003, the federal legislature resolved a long-standing controversy on internal employment investigations. The subject matter was discussed at length in a 1999 Federal Trade Commission Opinion Letter ("Vail Letter").3 The Vail Letter applied the notice and disclosure requirements of the FCRA4 to an attorney hired to investigate a workplace sex harassment complaint.

The Vail Letter interpreted an attorney in this role as a "consumer reporting agency"; it interpreted an investigation report based on personal interviews with employees as an "investigative consumer report." Because the Vail Letter made such interpretations, it espoused FCRA coverage of an attorney's performance of an employer's internal sex harassment investigation.

The Vail Letter recognized no distinction between an internal workplace investigation conducted by a third party and an employer's criminal background check or credit history check of an employee candidate through a third-party vendor. In the latter situation, the FCRA requires that the employer obtain the consent of the candidate before using a third party or consumer reporting agency to obtain the information. Among other things, the FCRA requires providing the subject of the report with a complete copy of the report. In addition, the FCRA requires that the subject have the opportunity to dispute alleged inaccuracies where the report is used to support an adverse employment decision against the subject.5

The FCRA's consumer protections regarding credit checks and background checks by employers make good sense. However, these requirements are less intuitive in the context of an employer's response to allegations of unlawful harassment.6

Compliance with the FCRA in the typical discrimination complaint scenario conflicts with the basic tenets of an effective policy on equal employment opportunity and sexual harassment. Such a policy supports the filing of complaints by promoting confidentiality, prohibiting retaliation, and ensuring a prompt and thorough investigation.

However, where an employer retains a third-party investigator, it is not always appropriate to inform the accused employee of the nature and scope of the issues prior to conducting an investigation. Further, it is difficult to justify conditioning an investigation process on the accused employee's consent. Finally, where the investigation report supports disciplinary action against the accused, it is often not appropriate to provide him or her with a complete copy of the report, which includes witness statements.

New FACT Act

Criticism of the Vail Letter remained widespread until December 4, 2003,7 when Title VI, § 611 of the new Fair and Accurate Credit Transaction Act ("FACT Act")8 amended the FCRA, effective March 31, 2004. The FACT Act clarifies that the notice and disclosure requirements of the FCRA: (1) do not apply when an employer retains a third party to investigate employee misconduct concerns; and (2) continue to apply to communications relating to investigation of an individual's credit. Specifically, the FACT Act broadly excludes FCRA coverage

if the communication is made to an employer in connection with an investigation of (i) suspected misconduct relating to employment; or (ii) compliance with Federal, State, or local laws and regulations, the rules of a self-regulatory organization, or any preexisting written policies of the employer.9

The FACT Act also makes the exclusion contingent on limiting communication relating to the investigation to the employer or agent of the employer, or governmental agents or others required by law.10 This contingency appears to address concerns that an employer might disclose an investigation report to a complainant, but not to the accused.

Impact of FACT Act on
Workplace Investigations

As a result of the FACT Act, employers may obtain professional workplace investigations from third-party sources, including attorneys, without concern for FCRA compliance measures that previously were necessary. Thus, employers need not delay anticipated disciplinary action simply because a third party investigates the matter. Employers are not required to notify the accused of an investigation regarding workplace conduct, obtain advance consent from the accused, or provide the accused with a copy of any investigation report.

Importantly, the FACT Act creates a potential notice requirement for employers...