In today’s regulatory environment, conducting background checks in compliance with both federal and state laws is not only a necessity but also a complex legal challenge for employers. This article delves into the intricacies of four major laws that California employers must consider: the federal Fair Credit Reporting Act (FCRA), the California Investigative Consumer Reporting Agencies Act (ICRAA), the California Consumer Credit Reporting Agencies Act (CCRAA), and the California Labor Code. Each of these statutes outlines stringent guidelines for how background checks should be conducted, what employers must disclose, and the rights of employees throughout the process.
1. Background checks must comply with the federal Fair Credit Reporting Act and the California Investigative Consumer Reporting Agencies Act.
Three applicable laws apply to California employers who perform background checks: the federal Fair Credit Reporting Act (FCRA), California Investigative Consumer Reporting Agencies Act (ICRAA), and the California Consumer Credit Reporting Agencies Act (CCRAA). These laws are complex and are very detailed.
The laws generally require employers to:
- Obtain written authorization from the employee to conduct the background check
- Provide notice about background checks
- If taking an adverse employment action based on the information obtained through the background check, additional notices must be provided to the employees.
For example, before the employer takes an adverse employment action, they must provide the employee with a notice that includes a copy of the consumer report being relied upon in the decision. The employer must also provide a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act”.
After the adverse employment action has been taken, the employer must provide certain information to the employee, such as:
- The employment decision was taken because of the information in the report
- The name, address, and phone number of the company that compiled the report
- The company that compiled the report did not make the hiring decision, and
- That the employee has the right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.
As set forth below, California employers can only perform credit checks for a very limited set of positions, and cannot perform a credit check on every employee. In addition, the CCRAA requires additional disclosures to the employee if a credit check is performed. See Cal. Civ. Code section 1785.20.5.
2. Even if conducting a background check in-house, if an employer searches public records, these records must be disclosed to the employee within seven days.
Generally, if the employer conducts the background checks itself, the FCRA, ICRAA and CCRAA do not apply. One exception to this rule is that the ICRAA requires that if the employer searches “public records” the employer must produce a copy of the public record to the employee within seven days of receiving the information (this applies to records received either in written or oral form). “Public records” are defined as “records documenting an arrest, indictment, conviction, civil judicial action, tax lien, or outstanding judgment.”
3. Employers are required to provide notice to the third-party conducting the background check under
Employers using outside credit reporting agencies must provide a certification to the reporting agency that the employer obtained the permission from the applicant/employee to obtain a background report, complied with the FCRA, and does not discriminate against the applicant or employee or otherwise use the information for an illegal purpose.
Here are some resources for employers to learn more about their requirements under federal law:
The Fair Credit Reporting Act & social media: What businesses should know (FTC)
Background Checks: What Employers Need to Know (FTC)
The interaction between the federal FCRA, and California’s own requirements under the ICRAA and CCRAA adds another level of complexity to the analysis. It is important for employers to review these laws closely to ensure compliance, and it is highly recommended to have experienced legal counsel review the practices.
4. California law prohibits employers from asking about criminal convictions prior to making a conditional employment offer.
In addition, since January 1, 2018 California employers cannot ask applicants to disclose information about criminal convictions. The law added as Section 12952 to the Government Code and applies to employers with 5 or more employees. Once an offer of employment has been made, employers can conduct criminal history background checks, but only when the conviction history has a “direct and adverse relationship with the specific duties of the job,” and requires certain disclosures to the applicant if employment is denied based on the background check. In addition, local jurisdictions, such as Los Angeles and San Francisco have implemented their own prohibitions on criminal history checks, and employers must also comply with these local requirements as well.
5. Credit Checks: California employers can only conduct credit checks (which are different from background checks) only for a limited type of employee in certain positions.
Since 2012, California employers can only perform credit checks on employees who meet very specific categories. Employers must ensure that the employee qualifies under one of the categories set out in Labor Code section 1024.5 in order to conduct a credit check.
The landscape of employment background checks in California is governed by a detailed and complex set of federal and state laws. It is imperative for employers to understand and adhere to the specific requirements of the FCRA, ICRAA, CCRAA, the Labor Code, and local laws to ensure legal compliance and protect their businesses from potential liabilities. Given the complexities involved, consulting with experienced legal counsel to review background check practices is highly recommended.