Employment Law

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Employer’s Obligation to Disclose Investigation of Employee
Everett F. Meiners, Partner, Parker Milliken Clark O'Hara & Samuelian, Los Angeles
Contributing author to Advising California Employers published by CEB.

Introduction
The Facts
The Investigative Consumer Reporting Agencies Act
Requirement to Disclose the Investigation
Disclosure within a Reasonable Time
Lesson


Introduction
The recent case of Moran v Murtaugh et al. (January 31, 2005, CA GO33102) is a reminder for employers to be sure that they have advised a terminated employee of any "public information" which they obtained about them as a result of an investigation of alleged misconduct, even if the public information is obtained through a "computerized legal database search." Failure to do so could result in a penalty of $10,000 or more.

The Facts
Moran was hired as a paralegal by the Murtaugh law firm to handle certain client confidential matters. He signed a confidentiality agreement at the time he was hired. A day later, an associate of the firm conducted a computerized legal database search and found three unpublished civil decisions in which Moran’s criminal felony convictions for, among other crimes, grand theft, were reviewed by the court. The associate anonymously placed copies of the decisions on the chairs of two partners of the Murtaugh firm. Evidently, the associate had not been requested by anyone at the firm to investigate Moran.

Based on the receipt of this information, the Murtaugh partners interviewed Moran. The contents of that conversation were disputed; however, partners of the Murtaugh firm said that they had advised Moran of the court decisions and asked him if he was the individual identified in those cases who had been convicted of a felony. Moran allegedly admitted those convictions and accepted the "opportunity" to resign. It was not disputed that copies of those decisions were not given to Moran at that time.

Approximately ten days later, Moran sent a letter citing the Investigative Consumer Reporting Agencies Act (Civil Code §1786 et seq.) and requested a copy of the public information upon which the adverse employment action was based, together with the date on which it was obtained. Immediately upon receipt of the request, Murtaugh mailed the requested documents and information to Moran. However, this was more than 7 days after the public information had been received by the Murtaugh firm.

The Investigative Consumer Reporting Agencies Act
The Investigative Consumer Reporting Agencies Act (Act) is a comprehensive set of regulations requiring "investigative consumer reporting agencies," to limit their reports to certain qualified parties, to make their files available for inspection by anyone they investigate and allow the consumer to correct any inaccurate information. In addition, violations of the Act subject the investigating consumer agency, and users of their reports, to actual damages incurred by the consumer, or $10,000, whichever sum is greater. An investigative consumer reporting agency is generally defined as someone who collects information on consumers for third parties. Thus, information gathered by an employer’s human resources department for its own use about its employees would not be covered.

However, Section 1786.53 provides that anyone who receives or uses such information for "employment purposes," without using a reporting agency, is also covered by the Act. This is why the review of the cases, anonymously supplied, subjected the Murtaugh law firm to the regulations of the Act.

Requirement to Disclose the Investigation
In a case of "first impression" the California Court of Appeal in San Diego was required to review the meaning and interpretation of Section 1786.53 of the Act. That section requires employers to provide employees with the information obtained from certain public records when the information sought is "for employment purposes" and concerns the subject’s "character, general reputation, personnel characteristics, or mode of living." Public records is defined in the Act to be any "records documenting any arrest, indictment, conviction, civil judicial action, tax lien, or outstanding judgment."

The employer is generally required to provide that information to the employee within 7 days of its receipt. However, that requirement would interfere with the continuing investigation of an employee who is suspected of "wrongdoing or misconduct." Thus subsection (b) (3) was added to the statute to provide that in the event that an employer is investigating the alleged "wrongdoing or misconduct" of an employee, the employer does not have to disclose that information to the employee until the "completion of the investigation."

Disclosure within a Reasonable Time
The court, noting that the statute does not specify any exact number of days for the disclosure upon the completion of the investigation, concluded that the employer’s duty was to provide copies of any public record obtained within a reasonable time after the investigation was over.

Lesson
This case reminds us of at least two requirements of the statute. First, any receipt of public information, even if obtained from Lexis­Nexis, reviewed "for employment purposes," must be disclosed if any adverse action is taken with respect to the employee. Secondly, even though it is not necessary to advise the employee within 7 days of the receipt of an investigation report generated because of alleged "wrongdoing or misconduct," it is still the responsibility of the employer to provide the results of the investigation to the employee upon the completion of the investigation, if the employee is terminated. Even in the event no adverse action is taken, the statute requires the employer to provide a copy of the investigation results, unless previously waived in accord with the statute.

Although the Murtaugh firm was found to have complied with the Act by mailing the information to the employee within 12 days of the employees’ termination, it is the safer practice to deliver it to the employee at the time he is terminated.

 

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California Business Litigation