What’s the law on hiring a private eye to check for workers’ comp fraud? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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What’s the law on hiring a private eye to check for workers’ comp fraud?

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in Employment Background Check,Hiring,Human Resources

Q. We suspect one of our employees has filed a fraudulent workers’ compensation claim. We would like to hire a private investigator to gather information on the worker’s activities. What laws would govern that decision?

A. Under the federal Fair Credit Reporting Act (FCRA), if an employer seeks a consumer report from a consumer reporting agency regarding an individual, the employer must generally satisfy a series of notice requirements.

The FCRA defines a “consumer report” as “any written, oral or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristic or mode of living which is used or expected to be used ... for the purpose of serving as a factor in establishing the consumer’s eligibility for ... employment purposes.”

Many employers hire an outside organization to track an employee’s activities while on workers’ compensation leave.

The information gathered probably will involve the worker’s personal characteristics and may be a factor in his or her continued employment. If the worker is found to have committed fraud, termination may follow.

Furthermore, the FCRA defines “consumer reporting agency” as “any person which, for monetary fees ... regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information on consumers for the purpose of furnishing consumer reports to third parties.”

Generally, if an employer hires an investigator to conduct an investigation and provide a report (or even video surveillance), the investigator will be considered to be a consumer reporting agency.

An employer may argue that the investigator isn’t a consumer reporting agency because he or she doesn’t regularly provide consumer reports. However, given the uncertainty of how a court may rule in this situation, you should assume that a private investigator is a consumer reporting agency.

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