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Identity theft is one of the nation’s fastest-growing crimes. So it’s not surprising that the California Legislature has been busy crafting new laws to combat it. But a recent anti-identity theft bill, which went into effect Jan. 1 without fanfare, is suddenly creating a stir in the employment defense bar. The new legislation — says a growing chorus of lawyers — is so broadly drafted that it has serious unexpected side effects for employers. Besides creating onerous logistical burdens for businesses, the lawyers say the legislation will tie employers’ hands when investigating misconduct like sexual harassment, and could even spark incidents of workplace violence. The new law “caught a lot of us greatly by surprise,” says Victor Schachter, an employment attorney at Fenwick & West in Palo Alto, Calif. Schachter says he wasn’t even aware of the legislation until after the bill had been signed by Gov. Gray Davis, and Schachter calls certain elements of the bill “patently ridiculous.” “It’s raising huge concerns amongst employers,” says Robert Blumberg, a partner in the Los Angeles office of Littler Mendelson. It’s not unusual for employers to complain about a new law’s intended consequences, explains Blumberg, but this bill seems to have a number of unintended consequences that people aren’t happy about. The bill’s creators say they’re aware of some of its unintended ramifications, and that they’re working on fixes. “I think everyone will be OK when the dust settles and we get a clean-up bill,” says Stan DiOrio, chief consultant to Assemblyman Rod Wright, the bill’s author. According to DiOrio, the first “emergency” clarifications to the bill could be available within a few months. Of course, whether the changes DiOrio has in mind are exactly the same as what employment lawyers want is still an open question. M. Kirby Wilcox, an employment attorney at Paul, Hastings, Janofsky & Walker in San Francisco, says he’s keeping his fingers crossed, but he’s not too optimistic about rectifying the bill. “The horse may be out of the barn.” AB655 is a set of amendments to the California Investigative Consumer Reporting Agencies Act. The bill passed without any opposition. The purpose of the bill is to let victims of identity theft discover if their records contain false information resulting from an impostor’s misdeeds. But by expanding the definition of an “investigative consumer reporting agency” to include even a company’s own human resources department, and increasing notification and disclosure requirements, the law has profound implications for employers. Some attorneys contend that the new rules would require businesses to provide every single job applicant with a full report of their reference checks and any other background check information that was compiled. For employers that hire thousands of people, and interview even more prospective candidates, this would obviously present a significant, and unwelcome, burden. Employment attorneys say they’re getting flooded with calls from worried employers. There are “questions they’re asking me that I can’t even answer,” says Martha Michael Gates, an attorney in the Sacramento office of Seyfarth Shaw. But with statutory penalties of $10,000 per violation — plus attorney fees and possible punitive damages — no one is taking the matter lightly. “The reason it’s so important is because it’s so poorly drafted, and it has quasi-criminal penalties that are fairly significant,” says Gates. One of the biggest areas of concern involves workplace misconduct investigations. As written, the new rules require employers conducting investigations into things like sexual harassment to furnish a copy of the report to the suspect within seven days of its completion. But some wonder whether this will discourage witnesses from testifying in misconduct investigations. “People are always reluctant to talk in the first place,” says Holland & Knight partner Wendy Lazerson. “But when they know that the person they’re talking about is going to have access to the information, they’re not going to be as willing to communicate in an open, honest, way.” The end result, says lawyers, is that the new laws could put a damper on such workplace investigations. And at a time when the U.S. Supreme Court has tried to encourage employers to be proactive in combating on-the-job harassment, many attorneys see this as a step in the opposite direction. Alicia Farquhar, special counsel at Wilson Sonsini Goodrich & Rosati, worries that in the workplace violence context, the new rules have the potential to actually trigger an incident. Simply trying to find out if a person has a history of violent behavior for instance, by doing something like a criminal background check, could be the switch that sets the person off. “If we want to do a more extensive [investigation] and see if this person does present a threat, we have to notify that person,” says Farquhar. “That presents an obvious problem if this person is volatile.” Firms like Littler Mendelson, Fenwick & West and Seyfarth Shaw have all released special bulletins to alert employers about the new regulations and some of the potential ramifications. Seyfarth Shaw has a couple of client breakfast briefings planned this month in which the issue is expected to be the prime topic of conversation. And some lawyers, like Littler’s Blumberg, even plan to contact Assemblyman Wright to propose their own fixes to the law. “I’m not sure how amenable he would be to it,” says Blumberg, who adds that one of his clients has already contacted the bill’s author. “The bottom line is that the purpose behind [the bill] is good, but the unintended consequences may cause more problems than the amendments solve.”

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