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Investigating Employee Misconduct

The Federal Fair and Accurate Credit Transactions Act of 2003 (FACTA) relaxed the rules governing employer investigations of employees accused of misconduct such as discrimination, sexual harassment, and workplace violence, etc. The passage of Dodd-Frank in 2010 shifted rulemaking for the protection of consumer data from the FTC to the Consumer Financial Protection Bureau (CFPB). A business can hire an outside firm to investigate allegations of employee misconduct without receiving the accused employee’s written consent for the investigation. In addition, businesses are only required to provide a report when adverse action is taken and may withhold the names of interviewed sources.

Amendments to FACTA have set a new standard for what FACTA calls “employee misconduct investigations.” FACTA now states that job applicants and employees who have undergone an employment background screening covered by the Fair Credit Reporting Act (FCRA) may receive a free annual file disclosure from the company that performed the background check. Per the FACTA, each person can access their credit report from the three credit reporting bureaus for free once a year.

Workplace investigations are conducted by a third-party that an employer may hire if an employee is suspected of the following:

  • Misconduct relating to his or her employment.
  • A violation of Federal, state or local laws or regulations.
  • A violation of any pre-existing written policies of the employer.
  • Noncompliance with the rules of a self-regulatory organization, such as a company that oversees the securities and commodity futures industry.

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