California Employers Using Criminal History Face New Compliance Obligations

This post originally appeared on The Big Picture, Seyfarth Shaw’s News & Insights blog. It has been republished here with permission. 

For many years, California employers have been subject to the state’s Fair Chance Act, which (in a nutshell) requires employers to:

• wait until after a conditional offer of employment to inquire about or consider criminal history;
• conduct an individualized, job-related assessment before rejecting an applicant due to criminal history; and
• follow a two-step notice process if action is taken based on the criminal history, which is similar, but not identical, to the Fair Credit Reporting Act’s notice requirements (and applicable even if the criminal history was not discovered from a FCRA consumer report (e.g., self-disclosure, internet search, etc.)).

On July 24, 2023, the Office of Administrative Law approved the California Civil Rights Council’s proposed modifications to the regulations applicable to employer use of criminal history, which are effective October 1, 2023.

We set out below the key changes that may require California employers to review and modify their practices relating to use of criminal history in hiring and other employment decisions.

• Employers remain prohibited from requesting and using criminal history information until after a conditional offer of employment. This prohibition also applies to current employees in the context of decisions regarding promotion, training, discipline, lay-off, or termination. The regulations clarify that the definition of “applicant” now includes “an existing employee who is subject to a review and consideration of criminal history because of a change in ownership, management, policy or practice.”
• Employers cannot put anything in a job advertisement or posting that indicates a person with a criminal history will not be considered.
• Unless an exception applies, if an individual volunteers information about their criminal history before receiving a conditional offer, the employer may not consider the information until after it has decided whether to make a conditional employment offer.
• The regulations continue to exempt employers who are required by any state, federal, or local law to conduct criminal background checks or to restrict employment based on criminal history. The regulations clarify, however, that the exemption applies only if the employer is required by law to conduct the background check—the exemption does not cover an employer if a state, federal, or local law requires another entity, such as an occupational licensing board, to conduct the background check.
• The regulations continue to require an employer’s individualized assessment to include consideration of (a) the nature and gravity of the offense or conduct, (b) the time that has passed since the offense or conduct and/or completion of the offense, and (c) the nature of the job held or sought. The new regulations provide employers greater clarity when conducting this assessment by including numerous examples of evidence that may be relevant to each of the three factors. For instance, when considering the nature and gravity of the offense or conduct, the employer may consider whether a disability, trauma, domestic or dating violence, sexual assault or stalking, human trafficking, duress or other similar factors contributed to the offense or conduct.
• The regulations now require an employer to conduct an “initial” individualized assessment before sending the notice of preliminary decision (a notice that is similar but not identical to a FCRA pre-adverse action notice). This is important because information relevant to the job-related assessment is usually not available to the employer and, thus, employers often rely on their preliminary (pre-adverse action) notice to request the information. Requiring an employer to send the preliminary notice “after conducting an initial individualized assessment” suggests that employers may either need to make initial contact with the applicant or employee before sending the first notice or gather the relevant information through some other means (i.e., criminal history self-disclosure with specific questions relevant to the assessment) before the first notice.
• The regulations set out numerous examples of the types of rehabilitation or mitigating evidence, including documentary evidence, that an applicant or employee may provide, and that an employer must consider. As an example, if offered, an employer must consider whether “trauma, domestic or dating violence, sexual assault, stalking, human trafficking, duress, or other similar factors contributed to the offense or conduct” and whether “a disability, including but not limited to past drug addiction or mental impairment, contributed to the offense or conduct, and, if so, whether the likelihood of harm arising from similar conduct could be sufficiently mitigated or eliminated by a reasonable accommodation, or whether the disability has been mitigated or eliminated by treatment or otherwise.”
• Employers may neither mandate certain information nor refuse to receive and consider any information the applicant or employee presents whether by his or her own submission or by submission from others at the individual’s request. Employers also may not require an individual to disclose their status as a survivor of domestic or dating violence, sexual assault, or stalking and may not mandate that an individual produce medical records and/or disclose the existence of a disability or diagnosis.
• The regulations continue to require an employer to conduct a “reassessment” if an individual provides rehabilitation or mitigating evidence in response to the preliminary decision notice, but now includes additional factors an employer may want to consider as part of this reassessment.
• The preliminary decision notice still must (a) identify the criminal history that is potentially disqualifying, (b) include a copy of the conviction history report and any other document that includes information about the conviction history, and (c) notice of the right to respond before the employer makes a final decision. Applicants or employees have at least five business days from receipt of this notice to respond. The regulations remove any ambiguity over when the notice is “received” by clarifying that if an employer sends the notice through a format that does not provide a confirmation of receipt, then the notice is deemed received based on the method of delivery: (a) five calendar days if mailed within California; (b) 10 calendar days if mailed outside of California; (c) 20 calendar days if mailed outside of the United States; and (d) two business days if emailed.
• The regulations still do not require an employer to disclose to the applicant or employee its specific analysis of the criminal history, although an employer can choose to do so.
• The regulations expand the definition of “employer” to include, among other things, “any entity that evaluates an applicant’s conviction history on behalf of an employer, or acts as an agent of an employer, directly or indirectly.” Whether this broad definition will reach actions by consumer reporting agency’s on behalf of their customers remains to be seen.
• The regulations continue to require an employer to advise in the final decision letter of the individual’s “right to contest the decision by filing a complaint with the Civil Rights Department.”

All employers should consider a privileged review of their background screening practices by experienced counsel. Beyond California, several jurisdictions also have their own laws concerning “job relatedness” requirements for an employer’s use of criminal history information, including Illinois, New York, and Wisconsin, among others. And several have enhanced notice requirements that go beyond what the FCRA requires, including Illinois, New York City, and Seattle, among others.

In addition, employers continue to be targeted in hyper-technical FCRA class action lawsuits over the forms and process they use to obtain background check. As a result, employers are well advised to consider evaluating background check processes to ensure compliance with the FCRA, similar state fair credit reporting statutes, and substantive employment laws.