|
California
Investigative Consumer Reporting Agencies Act
(last updated March 2002)
With
the stated goal of curbing the rise of identity theft, the
California legislature has amended the California Investigative
Consumer Reporting Agencies Act ("ICRA") to require
employers to give job applicants and current employees who
are the subject of investigations by third-party reporting
agencies a copy of any report received. Consequently, as
of January 1, 2002, employers who hire firms to run background
checks about applicants or employees are required to provide
the subjects of the investigations with both a written notice
that a background check will be conducted and, upon conclusion
of the background check, with a written copy of the report.
In
addition, employers may now be required to provide employees
or applicants with information that they develop during an
in-house background investigation. Under the new law, the
applicant / employee no longer needs to request a copy of
the report before the employer must provide it. Although
managers are sure to dread this additional paperwork, employers
must comply with the new requirements to avoid substantial
penalties. Even with this added administrative burden, it
should be noted that there are still many benefits to having
an appropriate background check conducted.
What
is an Investigative Consumer Report? The term "investigative
consumer report" refers to any report that compiles
information on the subject's "general reputation,
personal characteristics or mode of living." This
information may be gathered online, through public records,
or through interviews with friends, neighbors, associates,
or anyone else who may have information about the consumer.
In the employment context, investigative consumer reports
typically include such things as criminal records checks,
bankruptcy filings, and employment verification checks.
Employers
Must Now Notify Current Employees That a Background Check
is Being Conducted: Although background checks are
most commonly prepared pre-hire, the scope of the ICRA
is not limited to investigations of job applicants. Now,
any time an investigation is conducted for employment purposes
(whether for pre-employment or when deciding promotions
for current employees), the employer must notify the subject
of the investigation in writing that an investigation is
being conducted, and inform the employee of the name and
address of the investigating agency. Additionally, the
notification must include the nature and scope of the information
being requested as well as a summary of the employee's
rights to obtain information from the consumer reporting
agency. The employer must provide this notification within
three days of requesting the report. The employer must
also certify to the investigative consumer reporting agency
that it has made these required disclosures to the employee
before the reporting agency may release any report.
Employers
Do Not Have to Notify Employees of Investigations Involving
Suspicion of Misconduct: Previously it was an open
question under both state and federal law whether the suspect
had to be told that a third party has been hired to investigate
suspected misconduct. This could include the hiring of
a private investigator to determine if an employee is stealing
or hiring a third-party investigator to investigate allegations
of harassment or discrimination. The new California statute
creates an exception to the notice requirement where the
investigation is sought "based upon the suspicion
of wrongdoing by the subject of the investigation." Thus
it is now clear under California law that an employer does
not have to tell the suspected thief or harasser that the
employer is on to him or her. However, the matter is still
unclear under federal law; employers can only hope that
the "feds" will follow suit and similarly clarify
the Fair Credit Reporting Act.
Employer's
Obligation to Furnish Copies of the Report: The most
significant burden created by the new amendments to the
ICRA is that employers are now obligated to provide all
applicants or employees with a copy of the investigative
consumer report. This is true even if the applicant is
rejected for other reasons or if the applicant is hired.
Also, the "misconduct" exception does not pertain
to the requirement that the report be provided to the subject
employee. The employer must provide this information, along
with information on who issued the report and how to contact
them, either at the time of the meeting or interview between
the subject of the investigation and the employer, or within
seven days of the date the employer receives the report-whichever
is earlier. Employers should note that this requirement
extends to all applicants or employees who are the subject
of a report and not only to those who make a written request
for the report or cases where adverse action was taken
based on the report.
Employers
Must Notify Employees of Investigations Done In-House: In
another significant change, the Legislature has extended
the scope of the law to cover investigations conducted
by an employer's own employees. Previously, the ICRA applied
only where an employer hired a third-party consumer reporting
agency that charged a fee to provide information. The law
now states that where any person, presumably including
an employer, compiles information in lieu of using a consumer
reporting agency, the person must "provide that information
to the consumer at the time of the meeting or interview
with the consumer, or within seven days of the date the
person obtains the information regarding the consumer." The
Legislature does not define what is meant by "information," nor
does the Legislature indicate in what manner this information
must be given to the applicant or employee. This provision
does not require that the employer prepare a written report
containing the "information." The intended purpose
of this provision was to require employers who conduct
background checks through "do-it-yourself" internet
checking services to make the same disclosures to the subject
as would be required if the background check were conducted
by a consumer reporting agency. Thus, while it is not entirely
clear what is required by this provision, given the penalties
involved, a cautious approach would be for an employer
to provide an applicant or employee with whatever information
is developed during the in-house investigation as a matter
of course. The statute does not indicate whether or not
an employer may delegate any of its paperwork obligations
to the third-party investigator; regardless, even if this
were permissible, the employer would still be liable where
an employee failed to receive the report.
Substantial
Penalties for Noncompliance: The amendments to the
ICRA include substantially increased penalties for noncompliance.
Prior to the amendment, penalties for employers who did
not comply were attorneys' fees plus the greater of actual
damages incurred as the result of nondisclosure or $2,500.
Under the amended statute, the penalty against an employer
for failure to comply has jumped from $2,500 to $10,000
- and the plaintiff may recover attorneys' fees, too. Additionally,
if the court determines that violation of the statute was
grossly negligent or willful, the employer may be liable
to the subject of the report for punitive damages.
Federal
Law Still Applies: In addition to the amended California
statute, employers should not forget the applicable federal
regulations under the FCRA. Under the FCRA, an employer
is obligated to notify an employee or applicant in writing,
separate from the job application itself, that it may be
seeking an investigative consumer report. Additionally,
the employer is required to obtain written authorization
from the applicant or employee before obtaining the report.
Summary: In
order to now comply with state and federal laws concerning
consumer investigations, the California employer must:
- Notify
an employee or applicant in writing, separate from the
job application itself, that the employer may be seeking
an investigative consumer report.
- Obtain
written authorization from the applicant or employee before
obtaining the report.
- Within
three days of ordering the report, inform the applicant
or employee that he will be the subject of a consumer investigation,
the name and address of the consumer reporting agency,
the nature and scope of the investigation, and a summary
of the consumer's rights under the law (unless the employer
has a good faith belief the employee has engaged in misconduct).
- Provide
the employee or applicant with a copy of the report along
with the name and address of the investigating agency no
later than seven days from the date the employer receives
the report.
For
more information about related investigation issues, see
the article Investigating Employee
Complaints.
|
