HR Management & Compliance

Investigating Sexual Harassment Complaints: Why Utilizing Outside Investigators Is Becoming More Complex—And Controversial

Employers are frequently reminded of their legal obligation to promptly and thoroughly investigate all sexual harassment complaints and, as a result, often call in lawyers or specially trained consultants to conduct a complete and objective inquiry. But a controversial new government opinion suggests that using outside investigators could result in your inadvertently breaking a federal consumer protection law. We’ll explain what this latest wrinkle is all about and examine other issues that can arise when you hire attorneys or other experts to look into allegations of misconduct.

Credit Reporting Law Applies

The problem stems from a recent Federal Trade Commission (FTC) opinion letter. The FTC takes the position that the Fair Credit Reporting Act covers workplace investigations. According to the government, attorneys or outside investigators who are regularly paid to check into harassment or other workplace misconduct are really “consumer reporting agencies” and therefore subject to the law’s detailed notice, authorization and disclosure requirements.

Consent And Disclosures Required

Although the opinion is not the final word on the subject (see recommendations below), it suggests that before you take adverse action against an employee based on the findings of an attorney or outside investigator, there are a number of steps that must be taken. These include obtaining the accused employee’s consent before launching the investigation, disclosing the results of the investigation – including a copy of any written reports – and complying with the law’s strict notice requirements. Although the penalties for violating the credit reporting law are generally not very severe, the FTC’s position creates the more troublesome possibility that an employee fired for misconduct could sue you for wrongful termination because you failed to comply with the law.

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Other Investigation Risks

Using outsiders to investigate misconduct can raise other unexpected problems. For example, an attorney who investigates a case for you that ends up in court might need to be a witness at the trial – and thus unable to also represent you. And if you want to rely on the results of your lawyer’s investigation to show that you acted in good faith, you’ll probably have to give up your right to keep your communications with your attorney confidential.

Investigator’s License Required

Another potential problem is that California law requires non-attorney, outside consultants who investigate workplace complaints to have an investigator’s license. Lack of a license could be used to attack the person’s credibility at trial. To confirm whether someone has a current license, call the state Department of Consumer Affairs at (916) 322-4000.

What To Do Now

Here are some general guidelines for how to deal with these issues:


  • Obtain advance authorization. It is not certain whether the courts will ultimately uphold the FTC’s conclusions. It’s also possible that Congress will amend the law to make it clear hat workplace investigations by attorneys or other outside experts are not covered. In the meantime, the conservative approach is to have all job applicants sign an authorization in advance agreeing to an investigation if they are ever accused of misconduct, says attorney Stefan Miller with the Torrance law firm of Woldt & Associates. When it comes to existing employees, however, following the FTC’s opinion could create a dilemma for employers. That’s because if there are allegations of misconduct, you must investigate – regardless of whether the employee consents. Otherwise you risk liability not only for the harassment, but also for a claim of wrongful termination by the alleged harasser. For this reason, for the time being, many employment attorneys are recommending that employers defer implementation of procedures under the credit reporting law until there is further guidance from Congress or the courts.


  • Plan to disclose results. You should always assume that your findings will become public regardless of who conducts the inquiry. Consequently, written reports should document your good faith efforts to gather the facts and the objective reasons for your decisions. Always inform a worker accused of wrongdoing that you are investigating the charges, give the person a chance to respond, and explain the basis for any disciplinary action. This will help you show that you acted in good faith and that you made an effort to comply with the spirit, if not the letter, of the credit reporting law.


  • Weigh the benefits and risks of outside help. Using an outsider to investigate is sometimes preferable despite the potential problems, according to Mary M. Roberts, a partner in the Oakland office of the law firm Crosby, Heafey, Roach and May. For example, Roberts says having an attorney look into the charges can be a good idea when your own staff lacks adequate experience or the accused person holds a high-level position in the company. And getting legal help early in the process can also reduce the likelihood that a dispute will end up in court.