Does the FCRA cover private eyes looking into 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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Does the FCRA cover private eyes looking into workers’ comp fraud?

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in Employment Background Check,Employment Law,Human Resources

Q. We suspect that one of our employees has filed a fraudulent workers’ compensation claim. We would like to hire a private investigator to gather information on his activities. By doing so, are we subject to the requirements of the Fair Credit Reporting Act (FCRA)?

A. Under the 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 likely will involve the worker’s reputation and personal characteristics, and may be a factor in the individual’s continued employment.

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

An employer may argue that a private investigator is not a consumer reporting agency because he or she does not “regularly” provide consumer reports.  However, given the uncertainty of how a court may rule in this situation, it will be wise for employers to assume that a private investigator is a consumer reporting agency.

{ 3 comments… read them below or add one }

chad March 30, 2012 at 2:44 pm

Will workers comp have investigators watching you before first court date? Do you have to be getting paid first before they spend there money to investagate?


Herb B. November 23, 2011 at 3:27 pm

I agree with Mr. Smith’s analysis. The central issue is pre-employment versus post-employment. Additionally, an investigation report submitted to the employer’s legal counsel provides additional protective legal priviledge.

Herb Bermudez, MS, CRA
President & Chief Claims Officer, California #PI 12340


Richard F. Smith November 23, 2011 at 2:07 pm

The FCRA is designed to protect the consumers finanical data as well as allowing the consumer to recieve any report generated by a consumer reporting agency in which such report is used for hiring or may effect the future employment of the consumer. Once an employer hires an person and that person is suspected of some form of misconduct (workers’ compansation fraud or otherwise) the FRCA requirement does not completey apply. In this instance the only time the employee woould be entiled to recieve a copy of the consumer report is if an adverse employment action is taken against the conumer based on the evidence uncovered during the course of the investigation.

It is important to understand FRCA requirements as they relate to the hiring porcess vs. a person you have already hired and now suspect they have engaged in some form of misconduct. Once they are hired you do not have to notify them or get their permission to conduct an investigation. The only caveat would be if you intend to get thier credit record and in that instance you must have the employee’s (consumer) signed authorization. Most investigations of this type must remain covert to have any chance of success and a requirement to get the permission of the suspect employee to conduct an investigaton on them would be completely illogical.

Richard F. Smith
Vice President
Frasco Investigative Services


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