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California is rife with regulation of how employers may obtain and consider background check information for use in hiring and personnel decisions. The relatively new California ban-the-box law (effective Jan. 1, 2018) and the older Los Angeles and San Francisco ordinances and amendments to the California Labor Code set strict rules on when and how employers can consider criminal and credit histories in employment.
Before 2014, when San Francisco enacted a city-wide ban-the-box law, criminal history background checks were largely unregulated in California, except for a handful of Labor Code provisions that barred consideration of certain types of criminal records. And California employers were stripped of their ability to use credit checks for hiring and other personnel decisions in 2012, by amendments to the Labor Code that restricted the use of credit checks to very narrow circumstances. Los Angeles and the State of California have now joined San Francisco with their own ban-the-box laws, which markedly differ from San Francisco's.
As the number of class actions alleging Fair Credit Reporting Act (FCRA) violations continues to skyrocket, it is critical that California employers understand the basics of all laws affecting employment screening programs and determine what changes to policies, forms and practices will ensure compliance and reduce the risk of claims.
Generally speaking, before an employer may obtain a consumer report (aka a "background check report")—which may include criminal or credit history, from a third-party background check company ("consumer reporting agency" or "CRA")—the employer must make a clear and conspicuous written disclosure to the individual, in a document that consists "solely" of the disclosure, that a background check may be done. California's fair credit reporting statute also requires a separate, stand-alone disclosure, which cannot be combined with the FCRA disclosure. The applicant or employee must provide written consent for the employer to obtain a background check report.
Before an employer relies in whole or in part on a background check report to take an "adverse action" (e.g., rescinding a conditional job offer or discharging an employee), the employer must provide the individual a "pre-adverse action" notice, and include with it a copy of the report and the Consumer Financial Protection Bureau's Summary of Rights. This notice gives the individual an opportunity to discuss the report with the employer before the employer takes adverse action.
Once the employer is prepared to take the adverse action, it must then give the individual an "adverse action" notice, containing certain FCRA-mandated text.
California employers that rely on criminal and credit history information for employment purposes must also consider state and local laws that impose additional compliance obligations, regardless of whether the information is obtained from a CRA.
California's State and Local Ban-the-Box Laws Restrict Use of Criminal History
California's statewide ban-the-box law, as of Jan. 1, 2018, requires employers with five or more employees (subject to few exceptions) to follow certain procedures when requesting and using criminal history information for pre-hire purposes. Specifically, regardless of the source of the criminal history information, employers must:
In contrast to the FCRA pre-adverse and adverse action notices—required only if the adverse decision is based on information obtained from a background check report from a CRA—the California notices are required even if the employer doesn't order criminal background check reports from a CRA, but learns of the criminal history from a different source (such as an applicant self-disclosure).
Substantively, a wide range of criminal records are off-limits to California employers (unless the employer qualifies for very narrow exceptions identified in the Labor Code). Records that cannot be used are:
Although complying with California law can be challenging, employers that hire in the cities of Los Angeles and San Francisco must also look to the ban-the-box ordinances in these jurisdictions, which exceed the requirements found in the FCRA and the California ban-the-box law.
The Los Angeles Fair Chance Initiative for Hiring Ordinance
The Los Angeles ordinance, effective Jan. 22, 2017, applies to any employer located or doing business in the City of Los Angeles and employs 10 or more employees. An employee is any person who performs at least two hours of work on average each week in the City of Los Angeles and who is covered by California's minimum wage law. The ordinance also applies to job placement and referral agencies and is broad enough to cover other types of work, including temporary and seasonal workers and independent contractors.
The L.A. ordinance goes beyond California-imposed requirements by imposing the following onerous steps on employers when considering criminal history (regardless of the source):
Los Angeles also states that all solicitations and advertisements for Los Angeles opportunities must state that the employer will consider qualified candidates with criminal histories in a manner consistent with the law.
Moreover, employers must post, in a conspicuous workplace that applicants visit, a notice that informs candidates of the Los Angeles ordinance. Copies of the notice must be sent to each labor union or representative of workers that has a collective bargaining agreement or other agreement applicable to employees in Los Angeles. This notice can be found on the City's website.
San Francisco's Fair Chance Ordinance
San Francisco, as of Aug. 13, 2014, became California's first city to enact a ban-the-box law. Because the new California ban-the-box law provided greater protections to job applicants, the City and County of San Francisco Board of Supervisors (on April 3, 2018) amended the Fair Chance Ordinance (Article 49) to align (in some respects) with the California law. However, employers with five or more employees working in San Francisco that intend to inquire about and consider criminal history (regardless of the source) also must:
Covered San Francisco employers are barred from considering the following types of criminal records (even though these records are not off-limits in other California cities), subject to narrow exceptions:
California Workplace Solutions
Class actions against employers for failing to follow hyper-technical requirements for background checks have come to dominate the news. Employers in California and elsewhere will want to conduct (privileged) assessments to strengthen their compliance with the myriad laws that regulate use of an individual's criminal and credit history. Suggested next steps include:
Jennifer Mora is senior counsel in the labor & employment department of Seyfarth Shaw LLP's Los Angeles office. Reposted with permission. ©2018 Seyfarth Shaw. All rights reserved.
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