Employment Legislation Update

Employers that obtain credit reports or conduct background checks on applicants or current employees must be aware of recent changes to the Fair Credit Reporting Act (FCRA) and amendments made to FCRA by the Fair and Accurate Credit Transactions Act of 2003 (FACTA). FCRA imposes obligations on employers who procure “consumer reports” (defined to include information bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics and mode of living) and/or “investigative consumer credit reports” (which include information obtained from personal interviews with neighbors, friends or associates) from a third-party consumer reporting agency for an employment purpose — including hiring decisions and evaluations of employees for promotion, reassignment or retention.

Specifically, employers must notify an individual in a separate written disclosure that a report may be procured and must receive written authorization from the individual prior to procuring the report. Employers must also certify compliance with the Act to the consumer reporting agency from which reports will be procured. In addition, employers who take adverse action against an applicant/employee based at least in part on a consumer report must provide the applicant/employee with a copy of the report, a notice of intent to take adverse action, and a notification of adverse action.

Adverse Employment Actions

It is in connection with FCRA's obligations imposed on employers that contemplate taking an adverse employment action (eg, declining to hire an applicant or to promote an employee, or disciplining or terminating an employee) based at least in part on a consumer report that an important change was made. Specifically, the FTC made several changes to its “Summary of Your Rights Under the FCRA,” which must be provided to individuals against whom adverse action is planned. The new disclosure provides applicants/employees with information contained in the prior disclosure – ie, relating to: the right to be informed if information in their files have been used against them; their right to know the content of their files; their rights in connection with inaccurate and/or outdated information; consent requirements for employers to obtain information generally and specifically with respect to medical information; and contact information for federal agencies with authority to enforce their FCRA rights. In addition, the updated document advises individuals of: their right, under certain circumstances, to free disclosures of information about them in a consumer reporting agency's files (eg, for victims of identity theft); their right, upon request, to a free file disclosure every 12 months from each nationwide credit bureau and nationwide specialty consumer reporting agency by September 2005; and their right to request their credit scores.

The new disclosure also includes a statement in Spanish directing consumers to additional FCRA information; a statement informing identity theft victims and active duty military personnel that they have additional rights; information concerning a state's ability to enforce FCRA; and information advising consumers that many states have their own consumer reporting laws. The new disclosure, along with the FTC's recently revised “Notice to Users of Consumer Reports” (which includes information relating to employers' obligations under FCRA) and its “Notice to Furnishers of Information”, are available at the FTC's Web site: www.ftc.gov. Employers that fail to comply with FCRA's obligations risk civil liability, federal agency action, and possible corresponding state action.

Legislation Imposes Additional Obligations Under USERRA

On March 10, 2005, the U.S. Department of Labor (DOL) published an interim final rule in the Federal Register that affects private employers. The rule implements the Veterans Benefits Improvement Act of 2004 (the Act), which was signed into law by President Bush on Dec. 10, 2004 and imposes obligations on employers beyond the re-employment rights and other employee benefits mandated by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).

The Act has two principal components. First, employers must provide employees with notice of their rights, benefits, and obligations under USERRA. To assist employers in implementing this requirement, the DOL has recently provided a model notice (“Your Rights Under USERRA”) informing employees of their

USERRA rights, benefits, and obligations. Among other things, the notice informs employees of: their right to reemployment in their civilian jobs if certain conditions are met, as well as the terms of that reemployment; their right to be free from discrimination and retaliation; their right to health insurance protection if they leave their jobs to perform military service; and information on enforcement of USERRA, both through the DOL's Veterans Employment and Training Service (VET) and through a civil action. The DOL's model notice is available on its Web site at www.dol.gov/vets/programs/userra/poster.pdf. Employers may satisfy the new notice requirement by displaying the DOL's notice where they customarily place notices for employees.

Second, employers must now provide employees who are on leave to perform military service with the right to elect to continue their existing health coverage (for employees and their dependents) in an employer-based health plan for up to 24 months — an increase in duration from their previous 18-month obligation. The extension applies to all continuation elections made after Dec. 10, 2004.

In addition to the notice and health care continuation provisions, there are employment-related provisions of the Act associated with on-the-job training, apprenticeship programs and educational assistance. Importantly, the Act and its interim final rule do not affect the Department of Labor's proposal to implement USERRA through comprehensive regulations that were proposed on Sept. 20, 2004.

Employers that obtain credit reports or conduct background checks on applicants or current employees must be aware of recent changes to the Fair Credit Reporting Act (FCRA) and amendments made to FCRA by the Fair and Accurate Credit Transactions Act of 2003 (FACTA). FCRA imposes obligations on employers who procure “consumer reports” (defined to include information bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics and mode of living) and/or “investigative consumer credit reports” (which include information obtained from personal interviews with neighbors, friends or associates) from a third-party consumer reporting agency for an employment purpose — including hiring decisions and evaluations of employees for promotion, reassignment or retention.

Specifically, employers must notify an individual in a separate written disclosure that a report may be procured and must receive written authorization from the individual prior to procuring the report. Employers must also certify compliance with the Act to the consumer reporting agency from which reports will be procured. In addition, employers who take adverse action against an applicant/employee based at least in part on a consumer report must provide the applicant/employee with a copy of the report, a notice of intent to take adverse action, and a notification of adverse action.

Adverse Employment Actions

It is in connection with FCRA's obligations imposed on employers that contemplate taking an adverse employment action (eg, declining to hire an applicant or to promote an employee, or disciplining or terminating an employee) based at least in part on a consumer report that an important change was made. Specifically, the FTC made several changes to its “Summary of Your Rights Under the FCRA,” which must be provided to individuals against whom adverse action is planned. The new disclosure provides applicants/employees with information contained in the prior disclosure – ie, relating to: the right to be informed if information in their files have been used against them; their right to know the content of their files; their rights in connection with inaccurate and/or outdated information; consent requirements for employers to obtain information generally and specifically with respect to medical information; and contact information for federal agencies with authority to enforce their FCRA rights. In addition, the updated document advises individuals of: their right, under certain circumstances, to free disclosures of information about them in a consumer reporting agency's files (eg, for victims of identity theft); their right, upon request, to a free file disclosure every 12 months from each nationwide credit bureau and nationwide specialty consumer reporting agency by September 2005; and their right to request their credit scores.

The new disclosure also includes a statement in Spanish directing consumers to additional FCRA information; a statement informing identity theft victims and active duty military personnel that they have additional rights; information concerning a state's ability to enforce FCRA; and information advising consumers that many states have their own consumer reporting laws. The new disclosure, along with the FTC's recently revised “Notice to Users of Consumer Reports” (which includes information relating to employers' obligations under FCRA) and its “Notice to Furnishers of Information”, are available at the FTC's Web site: www.ftc.gov. Employers that fail to comply with FCRA's obligations risk civil liability, federal agency action, and possible corresponding state action.

Legislation Imposes Additional Obligations Under USERRA

On March 10, 2005, the U.S. Department of Labor (DOL) published an interim final rule in the Federal Register that affects private employers. The rule implements the Veterans Benefits Improvement Act of 2004 (the Act), which was signed into law by President Bush on Dec. 10, 2004 and imposes obligations on employers beyond the re-employment rights and other employee benefits mandated by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).

The Act has two principal components. First, employers must provide employees with notice of their rights, benefits, and obligations under USERRA. To assist employers in implementing this requirement, the DOL has recently provided a model notice (“Your Rights Under USERRA”) informing employees of their

USERRA rights, benefits, and obligations. Among other things, the notice informs employees of: their right to reemployment in their civilian jobs if certain conditions are met, as well as the terms of that reemployment; their right to be free from discrimination and retaliation; their right to health insurance protection if they leave their jobs to perform military service; and information on enforcement of USERRA, both through the DOL's Veterans Employment and Training Service (VET) and through a civil action. The DOL's model notice is available on its Web site at www.dol.gov/vets/programs/userra/poster.pdf. Employers may satisfy the new notice requirement by displaying the DOL's notice where they customarily place notices for employees.

Second, employers must now provide employees who are on leave to perform military service with the right to elect to continue their existing health coverage (for employees and their dependents) in an employer-based health plan for up to 24 months — an increase in duration from their previous 18-month obligation. The extension applies to all continuation elections made after Dec. 10, 2004.

In addition to the notice and health care continuation provisions, there are employment-related provisions of the Act associated with on-the-job training, apprenticeship programs and educational assistance. Importantly, the Act and its interim final rule do not affect the Department of Labor's proposal to implement USERRA through comprehensive regulations that were proposed on Sept. 20, 2004.