BY: Samuel Hernandez from the Daily Journal of Commerce – Oregon

2012 was a year full of changes and extensions to employee background check laws. These changes underscore the complexity and ever-increasing requirements compelling employers to review their practices and choose a background screening agency wisely, particularly given the increased number of individual and class-action lawsuits and agency investigations.

E-Verify extension

Federal law permits companies to employ only individuals who are authorized to work in the United States. All employers must verify an employee’s work authorization within the first three days of employment and complete a Form I-9 (employment eligibility verification).

E-Verify is an Internet-based system that lets employers determine whether their employees are eligible to work in the U.S. Use of E-Verify is not mandatory unless the employer is a federal contractor or employing individuals in Arizona, but other employers may choose to enroll in E-Verify.

Originally, E-Verify was due to expire at the end of September 2012; however, now it will continue through Sept. 30, 2015. The extension does not change the manner in which an employer uses E-Verify. Accordingly, an employer should continue to follow existing general principles and methods to comply with the law and E-Verify rules.

Consumer Financial Protection Bureau – Notice to Employees

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act established the Consumer Financial Protection Bureau. The CFPB is charged with, among other things, conducting rulemaking and enforcement of federal consumer financial protection laws, which previously were within the purview of the Federal Trade Commission.

Pursuant to the Dodd-Frank Act and the Fair Credit Reporting Act, the CFPB published an interim rule on Dec. 21, 2011, amending three essential forms mandated by the FCRA and used in employment background screening processes. Effective Jan. 1, 2013, the modified forms must reflect that consumers can obtain information pursuant to their rights under the FCRA from the CFPB instead of the FTC. The forms are available as appendixes to the regulations (model forms and disclosures).

The three forms concerned are:

  • A Summary of Your Rights Under the Fair Credit Reporting Act
  • Notice to Furnishers of Information: Obligation of Furnishers Under the FCRA
  • Notice to Users of Consumer Reports: Obligations of Users Under the FCRA

The “Summary of Your Rights Under the FCRA” is a notice that must be provided to an employer by a consumer reporting agency when the employer requests an employee’s consumer report. (Also, remember that before the employer can request a consumer report, it must provide the employee with a FCRA Disclosure Notice and obtain the employee’s written authorization.)

In turn, the employer must provide the employee with the notice when a consumer report is used to deny employment or to take any adverse employment action. The employer must provide the employee with the name, address and phone number of the CRA that provided the information.

The “Notice to Furnishers of Information” applies to certain furnishers of information to CRAs, which may include employers and firms hired to conduct background screening checks. This notice requires that furnishers of information be familiar with applicable laws and comply with federal guidelines and regulations dealing with the accuracy of information provided to CRAs.

The “Notice to Users of Consumer Reports” is provided to users of consumer reports informing them of their legal obligations. For instance, users of consumer reports must have a permissible purpose under the FCRA to obtain a consumer report (e.g., for employment purposes, including hiring and promotion decisions, where the consumer has given written permission).

State restrictions on use of credit reports

Although the FCRA provides employers performing background checks on employees or potential employees the ability to obtain consumer reports when they have a permissible purpose, an increasing number of states – including Oregon and Washington – have enacted laws and regulations that prohibit employers from accessing an employee’s or applicant’s credit report, subject to specific, limited exceptions.

One of the exceptions in Oregon is where the employee’s credit history is “substantially job-related” to a position requiring access to financial assets. This exception must be applied narrowly and the employer must explain how the employee’s credit history is “substantially job-related” to the job duties.

EEOC enforcement guidance

Earlier this year, the Equal Employment Opportunity Commission issued enforcement guidance on employer use of arrest and conviction records in making employment decisions. Although the EEOC did not ban criminal background checks, it places employers on notice that different treatment based on criminal history may lead to claims of disparate treatment based on race and national origin.

Tips for employer compliance

Improper adherence to the different requirements related to background checks can leave an unwary employer open to civil suits and EEOC complaints for engaging in prohibited employment policies and practices, including discrimination.

Employers should revise their practices and forms to comply with CFPB’s and Oregon’s restrictions on using consumer or credit reports to make employment decisions. When using a third-party background screening firm, an employer should make sure that the agency understands the complexity of both federal and state regulations and is using the new forms.

Finally, once background information is obtained, employers should consider the nature or gravity of any criminal offense, the time elapsed since the offense or completion of the sentence, and the nature of the job and conduct an individualized assessment to determine whether an adverse employment action is consistent with business necessity.

Samuel Hernandez is an attorney with Barran Liebman LLP. He provides compliance advice to employers and represents management in employment law litigation. Contact him at 503-276-2175 or at

Source:  Daily Journal of Commerce