E-Newsletter

June 2004

Recent Legislative Changes Affect the Workplace

Both Congress and the Wisconsin Legislature recently made changes that benefit employers in the arena of employer-employee relations.   

The Fair and Accurate Credit Transaction Act of 2003 (FACTA)

FACTA amends the Fair Credit Reporting Act (FCRA) to ease the effects of a 1999 Advisory Opinion, known as the “Vail Letter.”  A Washington attorney named Judi Vail requested an advisory opinion about whether a report prepared by a third party could be considered an “investigative consumer report” subject to the disclosures required by the FCRA.  On April 5, 1999 , counsel for the Federal Trade Commission responded that a report prepared by an outside third-party source, for example, outside counsel, consultants and investigators, was considered an “investigative consumer report” under the FCRA.  When employers use a third party to conduct an employee misconduct investigation and the third party prepares a report of the investigation, employers were required under the Vail interpretation to:

1. Obtain the employee’s consent prior to conducting an investigation;
2. Provide notice to an employee before taking an adverse employment action based on the third-party report; and,
3. Fully disclose the report to the employee as well as any other documents relating to the investigation.

This procedure, employers argued, compromised their ability to effectively investigate complaints of workplace misconduct and “chilled” an employee’s willingness to come forward with workplace concerns, such as sexual harassment, fearing retaliation. Further, the Vail interpretation conflicted with the EEOC guidance on sexual harassment investigations, which stressed protecting the confidentiality of documents and the complaining party’s identity where it was possible to do so.

Effective March 31, 2004 , FACTA eases employers’ obligations under the FCRA by exempting third party reports from disclosure as long as certain conditions apply:

1. The report is made to the employer in connection with an investigation of suspected employee misconduct relating to employment.
2. The investigation is performed by the employer in order to comply with federal, state or local laws or written policies of the employer.
3. The report is not made for purposes of investigating the employee’s credit worthiness, credit standing, or credit capacity.
4. The report is not provided to any person except the employer or the agent of the employer.

If any of these elements cannot be established, the FCRA may still require consent and disclosure under the Vail procedures.  The FACTA procedures do require an employer to disclose to the employee a summary of the third-party report containing “the nature and substance of the communication upon which the adverse action is based.”  Ostensibly, the employer does not have to obtain the alleged wrongdoer’s consent prior to initiating the investigation and, after such a report is prepared, is not required to provide the summary to the employee prior to taking an adverse employment action.  FACTA does not, however, allow an employer to obtain a third-party report on applicants without consent.

2003 Wisconsin Act 118

A small provision contained in the new Jobs Creation Act (2003 Act 118) provides a new strategy that Wisconsin employers can use in response to frivolous filings by employees at the Equal Rights Division administrative hearing level.  The statute created by the Act, §227.483, provides that a hearing examiner “shall” award to a successful party both the costs and reasonable attorney’s fees that were incurred as a result of a frivolous claim. 

A likely example of pursuit of a frivolous claim would be the following:  after a complainant appeals a “no probable cause” finding to a hearing and the appeal is denied, the Administrative Law Judge’s finding that the matter was frivolous also would trigger the employer’s ability to recover its costs and attorney’s fees from either the complainant or his/her attorney.  Also, a reading of the “at any time during the proceeding” language in the Act indicates that an action may become frivolous during the course of the proceeding and an employer may recover its costs and attorney’s fees from that point going forward.  The statute also applies to any frivolous defense raised by employers.

The statute contains language that will allow Wisconsin employers or employees to argue, in good faith, for an “extension, modification or reversal of existing law” without having to worry about an award of costs and attorney’s fees against them.

For more information regarding employment law issues, please call our educational services department at (414) 988-8400 or e-mail kam@kclegal.com.