Please Read Carefully and Respond With Appropriate Letter.. Thanks!
On December 5th 2001, House Financial Services Committee Chairman Michael
Oxley, R-OH, and Subcommittee on Financial Institutions and Consumer Credit
Chairman Spencer Bachus, R-AL, have sent a letter to Federal Trade
Commission Chairman Timothy Muris challenging the FTC's interpretation of the
Fair Credit Reporting Act as it pertains to workplace investigations.
More specifically, the Chairman requested that the so called "Vail letter"
and similar staff interpretations be rescinded "pending further Congressional
action." Importantly, the Oxley/Bachus letter states, "It is our view that
Congress never intended for the FCRA to apply to investigations of workplace
We view this letter as the first of many that will turn back some of the
draconian legislation that passed through Congress, prior to September 11th.
Privacy zealots were able to foist their interpretation of the revised FCRA
upon the FTC as to mean that no workplace investigation could be conducted
without prior permission of the target of such an inquiry.
Moreover, after the investigation was concluded, the subject could obtain
copies of all investigative and legal reports on the investigation, including
statements of confidential sources and Whistleblowers. The net effect of
this law was that all law firms in the United States that conduct any form of
investigation on a person may itself be liberally construed as a Consumer
Credit Reporting Agency, as defined under FCRA. Obviously, such a finding is
not only ludicrous, but contrary to law, public policy and ABA Professional
Conduct standards regarding confidentiality and privilege.
Such a policy also significantly hampered corporate investigations and had a
devastating effect upon businesses large and small. Privacy special
interests would have it such that the target would have all the rights and
protections of a normal and legitimate consumer, the while business would
shoulder the cost to allow criminality to continue.
On October 31, 2001, a meeting with the FTC's Chairman of Consumer Protection
J. Howard Beales, III, was arranged by a number of professional organizations
in our industry here in Washington.
Although the FTC seemed somewhat understanding of the dilemma facing
employers and investigators, they clearly indicated that it was up to
Congress to ask for their advice and that the FTC did not provide Congress
with unsolicited requests for changes in law.
We do not opine on this claim, but leave it to the reader to decide whether
any regulatory agency seeking to expand its budget, authority, staff and
appropriation has not gratuitously offered Congress "suggestions and
guidance," the net effect being to significantly expand that regulatory
authorities powers and appropriations.
Hopefully the letter to Chairman Muris will have that effect and we encourage
you to write Chairman Muris as soon as possible to support this move by
Congress, as it directly affects all businesses, as well as law firms that
are engaged to conduct such investigations.
We believe that under the current administration, and because of the present
circumstances here in Washington, coercive and restrictive legislation, such
that passed prior to September 11th, is a bygone relic.
This letter is only the beginning of turning back to a more realistic
approach to solving internal business problems and permitting lawyers to
conduct legitimate inquiries.
Following is a copy of the Oxley/Bachus letter to the FTC and we ask that you
write a similar letter seeking reversal of FCRA implications upon legitimate
workplace investigation. Moreover, please forward this email to all
appropriate persons who can write similar letters to Chairman Marcus.
U.S. House of Representatives
Committee on Financial Services
2129 Rayburn House Office Building
Washington, DC 20515
December 5, 2001
The Honorable Timothy J. Muris
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Dear Chairman Muris:
Prior to your becoming Chairman, the FTC staff issued an opinion letter
dated April 5, 1999, from Christopher W. Keller to Judy Vail that indicated
the Fair Credit Reporting Act (FCRA) applied to investigations of potential
workplace misconduct conducted on behalf of an employer by most outside
entities, such as law firms, consultants and professional investigation
firms. These misconduct investigations, which normally do not involve
employees' credit records, had never been thought to be covered by this
credit reporting law until the FTC staff's pronouncement. Congress stated in
the FCRA that its purpose was to preserve the integrity of the banking and
credit industries. It is our view that Congress never intended for the FCRA
to apply to investigations of workplace misconduct.
This so-called "Vail letter" has generated tremendous practical problems
for employers that we hope you will be able to assist us in resolving. As
you may know, employers have a number of legal and ethical obligations to
promptly investigate and take corrective actions with regard to a broad range
of employee misconduct allegations including racial discrimination, sexual
harassment, breaches of securities regulations, fraud and theft. Legal
duties to investigate are imposed, for example, by the Civil Rights Act, the
Equal Employment Opportunity Commission, and US Supreme Court
interpretations. Moreover, employers in the securities industry have legal
obligations to "police" their employees to ensure compliance with a host of
antifraud and other regulatory obligations. The SEC and self-regulatory
organizations (such as the New York Stock Exchange and the NASD) rely on
self-policing by broker-dealers as the first line of defense against
Unfortunately, as interpreted by the FTC staff, the FCRA poses serious
conflicts and practical problems with regard to employers' fulfilling their
workplace misconduct investigation duties. Among other things, application
of the FCRA to employee misconduct investigation by outside professionals
would mean that employers generally would have to obtain an employee's
written permission for an outside firm to conduct an investigation of the
employee's possible misconduct. In addition, upon request, the employer
would have to provide the employee with a disclosure of the nature and scope
of the investigation and a copy of all information in the report or file,
which could be used to identify the individuals who furnished information to
the investigators. Similarly, before taking any adverse action, the employer
must provide the employee with a copy of the report, and a summary of his or
her FCRA rights.
Law firms, employment consultants, and other outside entities that undertake
the misconduct investigations would be deemed to be consumer credit reporting
agencies and would be subject to the numerous other FCRA requirements that
apply to credit bureaus. In addition, these outside investigators would be
subject to civil liability because of the conduct of the investigation,
regardless of the reliability of the findings.
The disclosures, prior authorizations and other FCRA provisions seriously
hinder outside investigators' abilities to obtain important factual
information and conflict with fundamental national policies embodied in our
various civil rights, employment, securities and other laws and regulations.
We believe that it is critically important to resolve the problems arising
from the FTC staff's interpretation. Congress did not craft the FCRA to
apply in this type situation.
Your predecessor acknowledged in a March 31, 2000, letter to
Representative Pete Sessions that the FCRA should not unduly hinder
legitimate workplace investigations, and endorsed amending the FCRA to
address at least some of these concerns. The FTC's General Counsel, Debra
Valentine, testifying before the then House Banking and Financial Services
Committee, on May 4, 2000, expressed similar views.
In that regard, we feel that it would be helpful and appropriate for the
FTC to have the Vail letter and any similar staff interpretations on this
issue immediately rescinded pending further Congressional action.
Thank you for your attention to this matter. Please feel free to have your
staff contact Carter McDowall, Senior Banking Counsel to the Committee, with
Michael G. Oxley Spencer T. Bachus
Subcommittee on Financial
Institutions and Consumer Credit
Donald M. Berlin,
Investigative Consultants, Inc.
2020 Pennsylvania Avenue NW
Washington, DC 20006
Phone: (202) 237-1500 (Live)
Fax: (202) 237-8642 (Fax)
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