by Eddy McClain


 NCISS Legislative Committee
In one of the most publicized cases yet to come to trial concerning alleged
violations of the Fair Credit Reporting Act, a Federal court has ruled that
the report to an employer by a private investigator, who conducted an
investigation of suspected drug use without the employee's permission, was
exempted from the purview of the FCRA.

In the matter of Shane Salazar, Plaintiff, v Golden State Warriors,
Defendant, U.S.District Court, Northern District of California, No. C 99-4825
CRB, November 9,2000. "A surveillance video and report, made by a private
investigations firm, of an employee allegedly engaging in activity suggesting
drug use were within the 'transactions or experiences' exception to the Fair
Credit Reporting Act."

The plaintiff's original complaint included seven causes of action: (1)
violation of the Fair Credit Reporting Act; (2) invasion of privacy; (3)
breach of the covenant of good faith and fair dealing; (4) defamation; (5)
wrongful termination in violation of public policy; (6) intentional
infliction of emotional distress; and (7) negligence. Upon motion of the
defendant, the Court dismissed the second, third, fifth, sixth and seventh
claims for failure to state a claim upon which relief may be granted.
Following the dismissal, the plaintiff amended his complaint to include a
number of labor code/unpaid overtime claims and then both parties agreed to
dismiss the defamation claim. This left the overtime issues and the alleged
FCRA violation.

The defendant moved for Partial Summary Judgment with respect to the
first cause of action (violation of the FCRA) on the grounds that the FCRA
does not apply as a matter of law to the videotape and report that the
investigator submitted to the defendant because they fall within the
"transactions or experiences" exception to the definition of a consumer
report. ( Section 603 (d)(2)(a)(i))

The Court said, "The parties do not dispute that the videotape and report
fall within the Act's general definition of 'consumer report.' What they do
dispute is whether the videotape and report issued by the investigator are,
nonetheless, outside the FCRA because they fall within the 'transactions or
experiences' exception."

The court then stated that although the investigative agency was considered a
Consumer Reporting Agency, the videotape and report contained information
"solely as to the experiences between the consumer (the plaintiff) and the
person making the report (the investigator)." The court said the fact that
the plaintiff was unaware that the "transaction or experience" was taking
place, did not remove the report and tape from the exception. The court then
granted summary judgment to the defendant as to the FCRA violation only.

Of particular note is that the investigative agency obtained three other
types of information during the investigation: (1) the listing of the
registered owners of automobiles encountered by the investigators, (2) a
criminal background check on the plaintiff, and (3) a printout from a public
information database regarding the plaintiff.

The agency only provided the vehicle information to the defendant employer
and since the motor vehicle information did not include information about the
plaintiff consumer, by itself, it did not constitute a Consumer Report. Had
the agency included the other items in their report, it would have been
deemed a Consumer Report outside of the exception.

Our readers should take note that this is a very narrow exception, though it
may apply to a number of investigative situations. It appears to apply to an
investigator's report of surveillance of an employee, provided the report
does not also contain other information about that employee, such as court
records, motor vehicle records, etc. It also would appear to apply to an
undercover investigation conducted in the workplace. So long as the
operative only reports his first-hand experiences with other employees, it
appears his report would fall under the exception. But if, as is common in
workplace investigations, the investigator reports conversations with other
employees about the consumer employee, the report would fall outside of the
exception and could only be permissible if all of the requisite regulations
were met. This means the investigator would have had to receive a
certification from the employer that the employer had advised the consumer
employee of his rights under the FCRA and the written permission to order a
Consumer Report, had been obtained. Further, the above example of reporting
conversations with others about the employee would also be considered to be
an Investigative Consumer Report that requires additional and more stringent

It should be noted that the author is neither an attorney nor a judge and the
information contained herein should not be relied upon as legal advice.
Readers should consult their own counsel on these issues. SPECIAL NOTE:
Rep. Pete Sessions, R-TX, is expected to introduce legislation by March 1,
2001 which will amend the FRCA as it applies to employee misconduct
investigations. Investigators will be urged to ask Congress to support this
critical legislation.