California employers that conduct background checks must navigate a wide range of legal requirements or face hefty penalties. Nuanced notice requirements apply to obtaining an employee's or prospective employee's consumer reports, criminal history and credit reports.
These requirements are not exclusive of each other and employers should take special care to comply with all requirements associated with the types of information sought.
Investigative Consumer Reports
Investigative consumer reports contain information on an individual's character, general reputation, personal characteristics or mode of living.
Prior to requesting these reports, an employer must first notify the applicant/employee of its intent to obtain such report through a standalone, clear and conspicuous written disclosure containing only the following information:
- A statement that the report may contain information about his/her character, general reputation, personal characteristics, and mode of living;
- The use of this information for employment purposes;
- The name, address, telephone number, and website of the reporting agency;
- The investigation's nature and scope; and
- Notification that the applicant can view his/her file during normal business hours.
The employer must also provide the "Summary of Rights," also known as "A Summary of Your Rights Under the Fair Credit Reporting Act" to the applicant/employee and obtain a written authorization from him/her before obtaining the report. The authorization can be included in the disclosure statement and should provide a checkbox by which the applicant may elect to receive a copy of the report.
If the employee/applicant elected to receive the report, the employer must request that a copy be provided within three business days. The report must contain the name, address and telephone number of the investigative consumer reporting agency.
Finally, the employer is required to certify to the reporting agency that it has made the applicable disclosures, has received authorization and has complied with the copy distribution requirements.
If the background check involves medical information, specific written consent from the applicant/employee must be obtained.
If the investigative report contains criminal history, the employer must comply with additional rules.
Employers with five or more employees are prohibited from inquiring about or considering criminal history prior to making a conditional offer of employment. Only after the conditional offer for employment is made can the employer seek this information by complying with the disclosure requirements outlined above.
Notably, in making employment decisions, employers are banned from considering: arrests that didn't result in convictions (with limited exceptions); convictions that have been sealed, dismissed, expunged, or eradicated; juvenile convictions; convictions for most marijuana possession offenses more than two years old; or a referral to or participation in a criminal diversion program.
Additionally, employers cannot consider criminal information if doing so would have an adverse impact on hiring or retaining a protected class employee.
Prior to making an employment decision based on a criminal conviction, an employer is required to conduct an "individualized assessment" to determine whether the specific offense is relevant to the job.
Employers should check local ordinances for requirements regarding this assessment. If the employer chooses to rely on the conviction, it must issue a pre-adverse action notice informing the applicant of the disqualifying convictions and provide a copy of the report relied upon.
The employer must also provide the Summary of Rights and inform the applicant/employee of his/her right to respond and provide rehabilitative or mitigating information, as well as the deadline to respond (at least five days).
The employer must consider information provided by the employee prior to making its final employment decision.
Once the decision is made, the employer must issue an adverse action notice informing the applicant/employee of its reliance on the conviction, the procedure for challenging the decision and a statement that the applicant/employee has the right to file a complaint with the Department of Fair Employment and Housing (DFEH).
Unlike investigative consumer reports, credit reports more narrowly consist of information bearing on a person's credit worthiness, standing or capacity. California law prohibits employers from considering or acquiring credit reports, except for applicants for:
- Managerial positions meeting the executive exemption;
- Positions in the Department of Justice;
- Sworn peace officers;
- Positions for which information in the credit report is legally required to be disclosed;
- Positions that involve regular access, for purposes other than routine solicitation and processing of credit card applications, to all of the following types of information: date of birth, Social Security number, and credit/bank account;
- Positions involving duties as a signatory on the bank or credit card account of the employer (not merely authorized to use the company credit card), having authority to transfer money or enter into financial contracts on the employer's behalf;
- Positions involving access to confidential or proprietary information; and
- Positions involving regular access to cash totaling $10,000 or more during the workday.
This ban however does not apply to consumer credit reports that verify income or employment and do not include credit information.
Similar to investigative consumer reports, prior to obtaining credit reports, employers must provide a standalone, clearly written disclosure to the applicant/employee and obtain his/her authorization.
The written disclosure must: (1) inform the applicant that the report will be used, (2) outline which of the above job exemptions applies, (3) identify the reporting agency and (4) provide a checkbox by which the applicant can elect to receive a copy.
The employer must also provide the applicant/employee with the Summary of Rights. If the employee/applicant elects to receive the report, the employer must request that a copy be provided on the same day.
The employer must certify to the credit reporting agency that it has made the applicable disclosures, has received authorization, and will not use the information in violation of any equal opportunity law. The employer must also certify that if it makes an adverse action based on the credit report, it will provide a copy of the report and the Summary of Rights to the applicant/employee.
What Employers Should Do To Comply
If an employer seeks information touching on both credit reports and investigative reports, the employer must comply with the notice requirements for both types of information. To aid in complying with background check laws employers should:
- Eliminate all questions related to criminal convictions on employment applications and during the interview process;
- Never seek criminal history information from any source before a conditional offer for employment;
- Refrain from asking questions regarding an applicant's credit worthiness or salary history from references or prior employers;
- Ensure exempt classifications are accurate prior to requesting credit reports;
- Treat all applicants and employees equally irrespective of any protected category;
- Limit the scope of the investigation to employment related issues;
- Take special care when basing employment decisions on background problems that may be more common among persons of protected class; and
- Ensure the pre-adverse action and adverse action notices are issued and compliant before basing an adverse employment decision on an investigative or credit report.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.