Amendments To California’s Investigative Consumer Reporting Agencies Act Impose Additional Burdens On Public And Private Employers

Recent amendments to the Investigative Consumer Reporting Agencies Act have resulted in additional notice and disclosure requirements for all employers who undertake background checks and other investigative reports on potential and current employees. The amendments, contained in Assembly Bill No. 655, recognize identity theft as the fastest growing white-collar crime in America, and conclude consumers are offered the greatest amount of protection if they automatically receive a copy of any investigative consumer report made on them. To insure that consumers receive a copy of such a report, the amendments, effective January 1, 2002, impose notice and disclosure requirements on investigative consumer reporting agencies and the businesses and institutions that use their services.

AB 655 requires all employers, including public employers, who request an investigative consumer report from an investigative reporting agency to comply with new notice and disclosure requirements. These requirements apply when a report on a person’s character, general reputation, personal characteristics or mode of living is requested for the purposes of employment, insurance or the hiring of a dwelling unit. Employers commonly use such reports for background checks on potential employees or as a tool for investigating current employees. Reports are routinely prepared by an investigative consumer reporting agency, defined as a person who gathers, reports, transmits, or communicates information about a consumer for the purpose of furnishing investigative reports to third parties.

Employers requesting a report must notify the employee in writing within three days that a report will be made. Employers must disclose the name and address of the investigative reporting agency, state the nature of the investigation requested and provide a summary of the procedure available to inspect the agency’s files. Employers must also disclose the report’s contents at the conclusion of the investigation.

The law applies not only to reports on potential employees but also to those reports used for evaluating a current employee for promotion, reassignment or retention. However, there are some reports for which the notice requirements do not apply. Specifically exempted are reports prepared as a result of an employer’s good faith belief that an employee is engaged in criminal activity which will likely result in a loss to the employer.

AB 655 also requires disclosure for employers who investigate an employee or conduct a background check without the assistance of an investigative reporting agency. Employers who take it upon themselves to collect, assemble, evaluate, compile, report, transmit, transfer, or communicate information in a report must provide the information to the subject of the report at the time of the interview or meeting, or within seven days from the date that the employer obtains the information, whichever is earlier.

There are stiff penalties for noncompliance with the requirements of AB 655. An investigative consumer reporting agency or the user of the information which fails to comply, may be liable for actual damages to the subject of the report, or $10,000, whichever is greater, plus costs and attorney’s fees. The subject of the report may also recover punitive damages if the court determines that the violation was grossly negligent or willful.