The Federal Trade Commission has closed an investigation into potential violations of the Fair Credit Reporting Act by a California-based health care company.  However, despite its decision to not recommend enforcement action, the Commission rejected the notion that the company’s use of background screening reports — or the use of reports to investigate job applicants in general — fell within the narrow exception to the FCRA procedure outlined in Section 603(y).

Under the section, communications that an employer receives in connection with an investigation of suspected misconduct relating to employment or in compliance with regulations or employer policies are excluded from the law’s notice, consent, and disclosure requirements.

In its letter, Commission staff asserted that it views Section 603(y) “as covering only investigations of current employees, rather than investigations of both current employees and job applicants.”  The FTC stated its opinion that “Section 603(y) was enacted to provide ‘a narrow technical correction’ to the FCRA to address concerns that these requirements were undermining the ability of employers to conduct meaningful investigations of possible employee misconduct by prematurely alerting employers to the existence of an investigation.”

These statements by the FTC regarding the exception to the FCRA provided by Section 603(y) should be reviewed by employers who rely on that exception.  It is also consistent with the FTC’s continued focus on employment background screening activities.

Troutman Sanders has extensive experience in background screening litigation and compliance, and it will continue to monitor this and related developments.