New Oregon Laws: Criminal Background Checks and State Retirement Savings Plan

HIGHLIGHTS:

• The new Oregon “Ban the Box” law prohibits employers from inquiring during initial applicant stages whether an applicant has a criminal conviction history, delaying background checks and questions until later in the hiring process.
• Enrolled House Bill 2960 creates a new Oregon Retirement Savings Board, which may implement a state-run Oregon Retirement Savings Plan that requires certain employers to automatically enroll employees in the plan.
• All employers subject to these new laws should review their policies to make certain they comply.

Two new Oregon laws establish policies regarding employer criminal background checks and questions for applicants and a state-run retirement savings plan. In part, Enrolled House Bill 3025 (HB 3025) bans the practice by some employers of inquiring in an employment application whether the applicant has ever been convicted of a crime or requiring an applicant to disclose, prior to an initial interview, a criminal conviction. Enrolled House Bill 2960 (HB 2960) creates a new Oregon Retirement Savings Board, which may implement a state-run Oregon Retirement Savings Plan. If the Plan is implemented, it will require certain employers to automatically enroll employees in the Plan.

Oregon Bans the Box with New 2015 Law

Inquiries About Criminal Convictions on Employment Applications, Prior to an Initial Interview or, If No Initial Interview Is Held, Then Prior to Making a Conditional Offer of Employment, Are Deemed an Unlawful Practice

On June 25, 2015, Oregon Gov. Kate Brown signed into law Enrolled House Bill 3025. Subject to certain exceptions, the new law bans the practice by some employers of inquiring in an employment application whether the applicant has ever been convicted of a crime. Moreover, even if that question does not appear on an employment application, the new law bars an employer from requiring an applicant to disclose a criminal conviction prior to an initial interview. Finally, if no initial interview is conducted, the applicant cannot be required to disclose a criminal conviction prior to the time the employer makes a conditional offer of employment.

The new law takes effect on Jan. 1, 2016.

“Ban the Box”

According to the National Employment Law Project, so-called “Ban the Box” initiatives provide applicants a fair chance at getting a job by removing criminal conviction history from job applications and delaying the background check inquiry until later in the hiring process.¹ When the new law takes effect, Oregon will join 17 other states with similar laws.

In a guidance issued in 2012, the federal Equal Employment Opportunity Commission endorsed “Ban the Box” initiatives by stating:

Some states require employers to wait until late in the selection process to ask about convictions. The policy rationale is that an employer is more likely to objectively assess the relevance of an applicant's conviction if it becomes known when the employer is already knowledgeable about the applicant's qualifications and experience. As a best practice, and consistent with applicable laws, the Commission recommends that employers not ask about convictions on job applications and that, if and when they make such inquiries, the inquiries be limited to convictions for which exclusion would be job related for the position in question and consistent with business necessity.²

Oregon’s New Law

HB 3025 makes it “an unlawful practice for an employer to exclude an applicant from an initial interview solely because of a past criminal conviction.”³ An employer excludes an applicant from an initial interview if the employer:

• requires an applicant to disclose on an employment application a criminal conviction
• requires an applicant to disclose, prior to an initial interview, a criminal conviction
• if no interview is conducted, requires an applicant to disclose, prior to making a conditional offer of employment, a criminal conviction⁴

Except as prohibited above, Oregon’s new law does not prevent an employer from considering an applicant’s conviction history when making a hiring decision.⁵

Oregon Law Exclusions

Oregon’s “Ban the Box” law does not apply in the following circumstances:

• if federal, state or local law, including corresponding rules and regulations, requires the consideration of an applicant’s criminal history
• if an employer is a law enforcement agency
• if an employer is in the criminal justice system
• if an employer is seeking a nonemployee volunteer⁶

Enforcement System

The new law will be enforced by the commissioner of the Oregon Bureau of Labor and Industries (BOLI) as provided in ORS 659A.820 – 659A.865. While not an exhaustive list of remedies, generally those sections of Oregon’s Revised Statutes allow any person claiming to be aggrieved by an alleged unlawful practice to file with BOLI a verified written complaint against the person alleged to have committed the unlawful practice. Thereafter, BOLI may investigate the complaint. If the investigation discloses any substantial evidence supporting the allegations of the complaint, BOLI will issue a finding of substantial evidence. BOLI proceedings are often a precursor to future civil litigation.

What This Means for the Oregon Business World

Before the end of 2015, employers should review job applications used by them to seek information from Oregon job applicants. Unless one of the exclusions apply, after Dec. 31, 2015, an employment application used by an employer that seeks information from an Oregon job applicant may not contain a question that requires the applicant to disclose whether s/he has ever been convicted of a crime.

Unless one of the exclusions apply, after Dec. 31, 2015, an employer that seeks information from an Oregon job applicant may not require the applicant, prior to conducting an initial job interview, to disclose a criminal conviction. During and after the initial job interview the employer may require the Oregon job applicant to disclose whether s/he has ever been convicted of a crime.

Since HB 3025 makes it “an unlawful practice for an employer to exclude an applicant from an initial interview solely because of a past criminal conviction,” an employer seeking information from an Oregon job applicant should not order a criminal background check on the applicant prior to conducting the initial job interview. After the initial job interview, the employer may order and review a criminal background check on the Oregon job applicant.

Unless one of the exclusions apply, after Dec. 31, 2015, if an employer does not conduct interviews of job applicants, and if the employer seeks information from an Oregon job applicant, the employer may not require the applicant, prior to making a conditional offer of employment, to disclose a criminal conviction. If an employer does not conduct job interviews, and if the employer wants to make an offer to an Oregon job applicant, the offer should be conditioned on the Oregon applicant consenting to and passing a criminal background check.

2015 Oregon Law Creates Retirement Savings Board

The Board May Implement a State-Run Oregon Retirement Savings Plan. If the Plan Is Implemented, It Will Require Certain Employers to Automatically Enroll Each Employee in the Plan, Unless the Employee Opts Out – Employer Contributions Are Not Required

On June 25, 2015, Oregon Gov. Kate Brown signed into law Enrolled House Bill 2960. The new law establishes the Oregon Retirement Savings Board (Board), consisting of seven members. Subject to certain prerequisites, the Board is directed by the new law to develop a defined contribution retirement plan called the Oregon Retirement Savings Plan (Plan) for individuals employed for compensation in Oregon compliant with requirements and rules specified in HB 2960. Several Plan requirements establish employer mandates discussed below. Contributions by eligible individuals will be allocated to confidential accounts established under the Plan. A fund is also established by the new law called the Oregon Retirement Savings Plan Administrative Fund (Administrative Fund), separate and apart from the General Fund, which will contain specified assets used for the administration of the Plan.

The Board is directed to report to a committee or interim committee of the Legislative Assembly by Dec. 31, 2016, regarding the status of the Plan. In general, the Board must establish the Plan so that eligible individuals may begin making contributions to the Plan no later than July 1, 2017.

The new law became effective on June 25, 2015.⁷

Oregon Retirement Savings Board

The Oregon Retirement Savings Board consists of the following seven members: the state treasurer or her/his designee, a member of the Oregon House of Representatives appointed by the speaker of the House, a member of the Oregon Senate appointed by the president of the Senate and four members appointed by the governor. The four gubernatorial appointments include: a representative of employers, a representative with expertise in the field of investments, a representative of an association representing employees and a public member who is retired.⁸

Prerequisites to Establishment of the Plan

The Board is directed by the new law to develop a defined contribution retirement plan called the Oregon Retirement Savings Plan for individuals employed for compensation in Oregon.⁹ However, development of the Plan is subject to certain prerequisites.

Before establishing the Plan, the Board must:

• conduct a market analysis to determine the feasibility of the Plan and whether and to what extent plans with the characteristics specified in HB 2960 exist in the private market¹⁰
• obtain legal advice regarding the applicability of ERISA¹¹ and the Internal Revenue Code to the plan¹²
• investigate whether employers that are not required to participate in the plan can make the plan available to their employees¹³
• investigate how to allow individuals who are not automatically enrolled in the Plan to opt in to the Plan and make contributions to an account, either through payroll contributions or another method of contribution¹⁴

If the Board determines that the Plan would qualify as an employee benefit plan under ERISA, the Board “may not establish the [Plan].”¹⁵

The Plan Must Comply with Requirements and Rules Specified in HB 2960 – Several Plan Requirements Establish Employer Mandates

The Plan must be compliant with requirements and rules specified in HB 2960¹⁶ and those requirements and rules establish certain employer mandates.

A covered employer is an Oregon employer that does not offer a qualified retirement plan to its employees, including, but not limited to a plan qualified under sections 401(a), 401(k), 403(a), 403(b), 408(k), 408(p) or 457(b) of the Internal Revenue Code.¹⁷ A covered employer must provide for automatic enrollment of its employees in the Plan unless the employee opts out of the Plan.¹⁸ Also, a covered employer must offer its employees the opportunity to contribute to the Plan through payroll deductions.¹⁹ Contributions made through payroll deductions must be deposited by the employer directly with the investment adviser for the Plan.²⁰

HB 2960 does not require a covered employer to make contributions to employee accounts. Moreover, the Plan cannot impose any duties under ERISA on employers.

Rules adopted by the Board for the Plan will specify the contents and frequency of required disclosures to employees. However, these disclosures must include, but are not limited to, a mandate that employees should seek financial advice from financial advisors and not from their employer. The disclosures must also state that a participating employer is not liable for decisions employees make.”²¹

Plan Accounts

Contributions by eligible individuals will be allocated to accounts established under the Plan.²² Rules adopted by the Board for the Plan will require the maintenance of separate records and accounting for each plan account.²³ Accounts established under the Plan will be pooled for investment.²⁴ Employers that participate in the Plan have no proprietary interest in the contributions to or earnings on amounts contributed to accounts established under the Plan.²⁵

In general, individual account information for accounts established under the Plan, including, but not limited to names, addresses, telephone numbers, personal identification information, amounts contributed and earnings on amounts contributed, is confidential and must be maintained as confidential.²⁶

The Plan, the Board, each board member and the state of Oregon may not:

• guarantee any rate of return or any interest rate on any contribution
• be liable for any loss incurred by any person as a result of participating in the Plan²⁷

Oregon Retirement Savings Plan Administrative Fund

A fund is also established by the new law called the Oregon Retirement Savings Plan Administrative Fund, separate and apart from the General Fund, which will contain specified assets used for the administration of the Plan.²⁸ Those assets include: moneys appropriated to the Administrative Fund by the Legislative Assembly; moneys transferred to the Administrative Fund from the federal government, other state agencies or local governments; moneys from the payment of fees and the payment of other moneys due the board; and any gifts or donations made to the state of Oregon for deposit in the fund and earnings on moneys in the fund.²⁹

Timing

The Board is directed to report to a committee or interim committee of the Legislative Assembly by Dec. 31, 2016, regarding the status of the Plan.³⁰ In general, the Board must establish the Plan so that eligible individuals may begin making contributions to the Plan no later than July 1, 2017.³¹

What This Means for the Oregon Business World

If you are an Oregon employer that already offers a qualified retirement plan to your employees, then you are not a covered employer under the new Oregon law.

If you are an Oregon employer that does not currently offer a qualified retirement plan to your employees, consider offering that type of benefit to your employees before the state-run Plan goes into effect; by doing so, you will not be a covered employer when the state-run Plan goes into effect.

If you are an Oregon employer and have determined that you do not want to offer a qualified retirement plan benefit to your employees, then wait and see if the state-run Plan, as envisioned by HB 2960, is determined to be an employee benefit plan under ERISA. If it is, the Board may not establish the state-run Plan. Therefore, essentially the new law cannot be implemented as written.

If you are an Oregon employer and the Plan as mandated by HB 2960 is not determined to be an employee benefit plan under ERISA, then study now how you will implement the Plan mandates. Then implement those mandates when the state-run Plan goes into effect.

Notes

¹ National Employment Law Project, Ban the Box Guide, May 2015.

² EEOC Enforcement Guidance No. 915.002, Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964, Section V.B.3, April 25, 2012.

³ HB 3025, Section 1.(1).

⁴ HB 3025, Section 1.(2).

⁵ HB 3025, Section 1.(3).

⁶ HB 3025, Section 1.(4).

⁷ HB 2960, Section 18.

⁸ HB 2960, Section 1.

⁹ HB 2960, Section 2.

¹⁰ HB 2960, Section 7(a).

¹¹ Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.)

¹² HB 2960, Section 7(b).

¹³ HB 2960, Section 7(c).

¹⁴ HB 2960, Section 7(d).

¹⁵ HB 2960, Section 15(2).

¹⁶ HB 2960, Sections 3 & 4.

¹⁷ HB 2960, Section 3(b).

¹⁸ HB 2960, Section 3(c).

¹⁹ HB 2960, Section 3(a).

²⁰ HB 2960, Section 3(f).

²¹ HB 2960, Section 9(g).

²² HB 2960, Section 3(1)(a).

²³ HB 2960, Section 3(1)(i).

²⁴ HB 2960, Section 3(1)(L).

²⁵ HB 2960, Section 3(1)(n).

²⁶ HB 2960, Section 5.

²⁷ HB 2960, Section 3(2)

²⁸ HB 2960, Section 6.

²⁹ HB 2960, Section 6(2).

³⁰ HB 2960, Section 14.

³¹ HB 2960, Section 15.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.