The new California criminal background check regulations are a tightrope strung between inappropriately using an investigation to make a hiring decision and the failure to investigate. Employers need to educate themselves now on the limits and liabilities associated with both ends of the challenge.
State, federal, and local regulators all have been cracking down on the process and the result has been growing litigation around the hiring process. Companies like Lowe’s, Pepsi, and Lyft have been sued this year over their background check procedures and basic screening of employment applicants. Just this week, a California company petitioned the U.S. Supreme Court for review of a Ninth Circuit ruling holding that it had violated the Fair Credit Reporting Act when it procured a job applicant’s consumer report after including a liability waiver in the same document as the statutorily mandated disclosure.
Limits on Criminal Background Checks
Effective July 1, 2017, the California Criminal Background Check Regulations will limit employers’ rights to use an applicant’s criminal background history in making employment decisions. Specifically, the regulations require employers to demonstrate that most criminal history information sought and used in its employment decisions is job-related and consistent with a business necessity.
According to the regulations, an employer must justify this policy or practice by demonstrating that it bears “a demonstrable relationship to successful performance on the job and in the workplace and measure[s] the person’s fitness for the specific position, not merely to evaluate the person in the abstract,” and that the policy or practice is “appropriately tailored” to the job.
The regulations provide two ways for an employer to meet these requirements:
- Conduct an individualized assessment of the applicant or employee; or
- Demonstrate that any “bright-line” disqualification policy properly distinguishes those who do and do not pose an unacceptable level of risk.
Regardless of whether the employer received information about an individual’s criminal background through a credit report or internally generated research, the employer must provide the applicant with notice, and a reasonable opportunity to present evidence that the information is factually inaccurate or the exclusion should not be applied due to their particular circumstances. There then must be consideration by the employer as to whether the information provided warrants an exception to their decision.
Additionally, an employer may still be found liable under the regulations if the impacted individual can show that there is a less discriminatory alternative available to achieve the employer’s goals as effectively as the challenged policy or practice, such as a more narrowly targeted list of convictions warranting disqualification for the position, or another form of inquiry that evaluates job qualification or risk as accurately without significantly increasing the cost or burden on the employer. Unfortunately, the FEHC provided no examples of such inquiries.
Local Background Ordinances
Starting on January 21, 2017 employers with ten or more employees are subject to the Los Angeles Fair Chance Initiative for Hiring Ordinance (FCIHO), which prohibits employers from inquiring into a job applicant’s criminal history by any means, unless and until a conditional offer of employment has been made to the applicant. This local ordinance follows San Francisco’s Fair Chance Ordinance from 2014, which prohibits employers with at least 20 employees from inquiring about a job applicant’s criminal history on an employment application, including “checking the box” to indicate criminal convictions. That measure also prohibits a covered employer from asking about criminal history during an initial interview. Notably, the law applies not only to regular employees, but also those performing contract or contingent work.
While these ordinances apply only to work being hired in these respective cities, California employers should also be aware that legislation is currently pending that would similarly make such practices unlawful under the state’s Fair Employment and Housing Act. AB 1008 (McCarty) seeks to impose a version of the Los Angeles ban the box ordinance on all private and public employers throughout the State of California, prohibiting inquiries into criminal history until after a conditional offer of employment has been made.
Recommendations for Employers
In recognition of the increase in litigation, employers should look to EEOC Guidance as it relates to the use of background checks. Recommendations from the EEOC include:
- Apply the same standards to everyone, regardless of their race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). For example, if you don’t reject applicants of one ethnicity with certain financial histories or criminal records, you can’t reject applicants of other ethnicities because they have the same or similar financial histories or criminal records.
- Take special care when basing employment decisions on background problems that may be more common among people of a certain race, color, national origin, sex, or religion; among people who have a disability; or among people age 40 or older. For example, employers should not use a policy or practice that excludes people with certain criminal records if the policy or practice significantly disadvantages individuals of a particular race and does not accurately predict who will be a responsible, reliable, or safe employee.
In addition, employers should review their employment applications to ensure questions related to an applicant’s criminal history are not in violation of state or local laws. Hiring managers should meet with company executives to discuss when background checks should be required for your particular business. Analyze whether criminal background checks are needed for specific positions. Then document the reasons why those conclusions were made. Finally train hiring managers about these new rules and the need for individualized assessments.
There are still valid reasons for employers to conduct background checks. But in light of the evolving nature of these laws, it is a good time to explore your current hiring practices.