Do companies that use workplace surveillance tools to make hiring and firing decisions risk violating the Fair Credit Reporting Act (FCRA)? According to the Consumer Financial Protection Bureau (CFPB or Bureau) in a recent comment, the answer to that question is yes. The Bureau’s official comment comes in response to a request for information issued by the White House’s Office of Science and Technology Policy on the impact of automated tools used by employers to monitor and evaluate workers. The CFPB’s position that the FCRA applies to automated worker surveillance tools is consistent with the Bureau’s March 2023 request for information on data brokers, discussed here, to determine whether the FCRA applies to modern data surveillance practices.

As background, the FCRA provides protections related to consumer reports. The FCRA defines “consumer report” to include “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 characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for … employment purposes.”

The gathering and use of information from worker surveillance technologies to support retention and promotion decisions has greatly increased in recent years, in large part because of COVID-19 work-from-home arrangements. But in a now-familiar refrain, the CFPB cautions that such “automated technologies may produce incomplete or inaccurate information or exacerbate biases.”

The CFPB makes clear that the FCRA may apply to worker surveillance when making decisions including hiring, firing, promotion, reassignment, retention, and compensation. The CFPB also expressed interest in exploring how the information employers obtain about their employees through such technologies can find its way into the data broker market as well as when such information is used for employment background screening and other decisions that could impact consumers.

Furthermore, the CFPB expressed significant concerns about whether entities offering evolving worker surveillance technologies to employers are complying with applicable law. The CFPB stated that a company’s choice to use new technologies does not absolve it from its legal obligations.

Our Take:

The CFPB presumably is not going to transform itself into an employment regulator, but its public announcement does signal an interest in protecting employee rights from the types of monitoring discussed by the Bureau in its comment. We expect the Bureau to consider enforcement action on this subject if a company engaged in such practices comes to its attention, which means that employers should consider their use of such technologies to ensure that they are in a defensible position. The subject matter of the Bureau’s statements lies at the intersection of employment, privacy and consumer protection laws, and we believe that all three need to be taken into account in assessing this issue. That’s why the three of us — representatives of Troutman Pepper’s Labor & Employment, Privacy, and Consumer Financial Services groups — wanted to write on this jointly and will be watching this issue together for further developments.

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Photo of Kim Phan Kim Phan

Kim is a partner in the firm’s Privacy + Cyber Practice Group, where she is a privacy and data security attorney, who also assists companies with data breach prevention and response, including establishing effective security programs prior to a data breach and the

Kim is a partner in the firm’s Privacy + Cyber Practice Group, where she is a privacy and data security attorney, who also assists companies with data breach prevention and response, including establishing effective security programs prior to a data breach and the assessment of breach response obligations following a breach.

Photo of Chris Willis Chris Willis

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending…

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

Photo of Tracey Diamond Tracey Diamond

Tracey is an experienced member of the firm’s Labor + Employment Practice Group. She counsels clients on workplace issues; provides harassment training; conducts internal investigations; drafts policies and procedures; negotiates employment and severance agreements; and advises on independent contractor, FMLA, and ADA compliance

Tracey is an experienced member of the firm’s Labor + Employment Practice Group. She counsels clients on workplace issues; provides harassment training; conducts internal investigations; drafts policies and procedures; negotiates employment and severance agreements; and advises on independent contractor, FMLA, and ADA compliance issues. She partners with clients to structure their workforce in the most efficient and effective way possible to help them achieve their business goals.

Photo of David N. Anthony David N. Anthony

David Anthony handles litigation against consumer financial services businesses and other highly regulated companies across the United States. He is a strategic thinker who balances his extensive litigation experience with practical business advice to solve companies’ hardest problems.

Photo of Ethan G. Ostroff Ethan G. Ostroff

Ethan Ostroff’s practice focuses on financial services litigation and consumer law compliance counseling. Ethan is part of the firm’s national practice representing consumer-facing companies of all types in defense of individual and class action claims and counseling them on compliance with federal and

Ethan Ostroff’s practice focuses on financial services litigation and consumer law compliance counseling. Ethan is part of the firm’s national practice representing consumer-facing companies of all types in defense of individual and class action claims and counseling them on compliance with federal and state laws.