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New rules on employee criminal-credit background checks

March 31, 2014

Davis Dwight & Tremaine LLP
Oregon business law firm

New Guidance for Employers Conducting Background Checks
By Angela Galloway

Employers who investigate workers’ criminal or credit backgrounds may want to review federal guidelines released March 10.

The joint publication of the Federal Trade Commission and the Equal Employment Opportunity Commission provides detailed guidance for employers who check into the criminal or credit histories of applicants or employees. “Background Checks: What Employers Need to Know” aims to guide employers in complying with federal laws that prohibit workplace discrimination and regulate commercial background reporting agencies.

Separate laws restricting employers’ ability to request and/or rely on such background checks have also been enacted by many states and cities, including Seattle and San Francisco.

The publication released today offers guidelines for developing policies and practices that avoid improper practices or discriminatory employment decisions. For example, the report advises:

  • Employers who obtain background information from a credit bureau or another company in the business of compiling background information must meet certain requirements under the Fair Credit Reporting Act. For example, they must (1) provide applicants and employees with written, stand-alone notice in advance of such checks – separate from any job application; and (2) provide notice before (and after) taking any adverse actions based on such information, including the source of the information and a copy of the report;
  • Employers should not ask applicants health-related questions (at least making a conditional offer of employment) and should inquire into an employee’s health without objective evidence that the employee is unable to do the job or poses a safety risk because of a medical condition;
  • Employers should avoid policies or practices related to background checks that result in “disparate impact” discrimination, such as policies that unfairly disadvantage individuals of a particular race or sex; and
  • Employers must conform to certain requirements for preserving and disposing of background reports.

The guidelines are based on existing standards and cover only the basics that businesses need to consider before running background checks of candidates and employees.  The FTC/EEOC pamphlet does not attempt to address many important details of employment law and the Fair Credit Reporting Act. Employers should ensure that all background checking practices are appropriate under federal, state and local laws.

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