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By Jeff Borders
Can you be excommunicated based on hearsay? 
Dear reader,
Thanks for your question.
Before we can talk about excommunication, it is important to understand the purpose of the disciplinary process within The Church of Jesus Christ of Latter-day Saints, because I think it is easy to misconstrue discipline with punishment.
It is important to note that the purpose of Church discipline is not to punish people, but to facilitate full repentance for someone who has made serious mistakes.
As members of The Church of Jesus Christ of Latter-day Saints, we believe that we come to Earth to learn, grow and become better by following the perfect example of Jesus Christ. The most central piece of this time on earth is our freedom of choice. As it is with life, some choices we make will be to our benefit and some are going to be mistakes. Most of these mistakes are easily overcome through sincere repentance as the person seeks their heavenly Father’s forgiveness in heartfelt and earnest prayer.
There are rare circumstances when serious transgressions are committed. Those transgressions can derail our walk on the covenant path. According to the church’s website, “Church discipline — restrictions and conditions of repentance that prompt a person to reevaluate their situation and return to full fellowship and activity — is a process designed to help us overcome sin in these instances.”
It is important to realize that it is not the bishop that makes repentance possible. As members of The Church of Jesus Christ of Latter-day Saints we believe that it is the atoning sacrifice of Jesus Christ that that makes repentance a reality. Under the direction of an inspired bishop, church discipline can help someone more fully apply the atonement of Jesus Christ and moved forward to overcome their individual mistakes.
In general, a bishop learns about transgressions when counseling the member involved. When a sin is not grievous the bishop may decide that no disciplinary action is needed. He will counsel the member and work with them to try and help them avoid further transgression.
Another option the bishop has is to place the member on informal probation, temporarily restricting his privileges as a Church member—such as the right to partake of the Sacrament, hold a Church calling (position), or even enter the temple. The bishop may ask the member to change some aspects of their life. As the bishop works with the member he may terminate the probation period when he is prompted by the spirit of revelation to do so. In cases like these, informal Church discipline may be all that is needed.
The most severe action that can occur as a result of serious transgression is a loss of Church membership, otherwise called excommunication. It must be noted that this is rare and is always a last resort. This step is only taken when previous disciplinary measures are working to help the member overcome their transgressions and move forward on the covenant path.
Now that we have built a solid foundation, we can address your question.
When it comes to hearsay, and it is merely that, hearsay or rumor, the answer is that a bishop may choose to bring the person in and ask them about it, or they may not. It is completely up to the promptings that the bishop, as the leader of his congregation, may receive.
I would add that many look at the disciplinary counsels within the church and do not understand its prime function. So let me reiterate what the goal of any disciplinary action is with a quote straight from the website, “Discipline at any level, from personal repentance and self-discipline to formal discipline in a Church setting, is intended to make us better, to help us overcome weakness and sin and to lift us as we seek to become true followers of Jesus Christ.”
I hope this helps clarify.
For further reading, you can check out Church Discipline on the Church’s official website, where most of this answer was drawn from.
