Businesses are subject to federal, state and possibly local rules
By Toni Vranjes
Mar 27, 2018 - SHRM
California employers that conduct background checks on job applicants must comply with a range of legal requirements—including federal rules, the new California ban-the-box law that took effect in January and local ordinances.
The federal Fair Credit Reporting Act (FCRA) governs background checks when
information is obtained from a third-party consumer reporting agency and
requires employers to send certain notices to job candidates. The new California
ban-the-box law includes broader notice requirements, and local ban-the-box laws
add their own nuances, which makes the process even more complicated.
"Employers have to understand the laws in the jurisdictions in which they operate, and make sure they're complying with them," said Paul Evans, an attorney with Morgan Lewis in Philadelphia.
Federal Law
If an employer decides to conduct a background check using a
third-party consumer reporting agency, the employer must adhere to the
FCRA.
There are strict procedures for compliance under the FCRA. The employer must
let the candidate know—in a stand-alone document—that it plans to order a
background check. The company must also get written authorization from the
candidate prior to conducting the investigation.
If the employer makes a preliminary decision that it might not hire the
candidate based on the background check, it must send a "pre-adverse action
notice." The employer must also send a copy of the background-check report and a
summary of rights. This gives the candidate an opportunity to dispute the
accuracy and completeness of the report, according to Evans. The company must
also give the candidate a reasonable period of time to do so.
Thereafter, the employer can send an "adverse action notice" that it has made a final decision not to hire the applicant. The employer must provide the candidate the contact information for the consumer reporting agency that supplied the report.
The employer must also inform the candidate that the consumer reporting agency didn't make the hiring decision and therefore can't give the reasons for the decision, explained Jennifer Mora, an attorney with Seyfarth Shaw in Los Angeles.
California employers must navigate additional rules when conducting background investigations. The statewide ban-the-box law prohibits inquiries about criminal history until a conditional job offer has been made.
Even prior to the ban-the-box law, California employers were also banned from
considering arrests that didn't result in convictions (with certain exceptions)
and convictions that had been sealed, dismissed, expunged or eradicated.
The state's ban-the-box law applies to businesses with at least five employees, but it doesn't apply to certain positions for which a background investigation is required by law.
If an employer plans not to hire someone based on the background check, it
must first perform an "individualized assessment" to determine if the
candidate's specific offense is relevant to the job.
The pre-adverse action
notice must identify the conviction at issue and include a copy of the
background report. The notice must inform the applicant of his or her right to
respond before the decision is finalized. Also, the employer must state that the
candidate may dispute the accuracy of the criminal history and that the
candidate may provide evidence of rehabilitation or mitigating circumstances,
Mora said.
The candidate has five business days to make an initial response. If the applicant notifies the company that he or she challenges the accuracy of the information and is gathering evidence, the candidate has another five business days to respond, Mora said. If the applicant provides additional information, the company must consider it before making a final decision.
If the employer decides not to hire the applicant based on the background check, then it must inform the candidate in an adverse action notice. Also, the candidate must be notified of the right to file a complaint with the Department of Fair Employment and Housing.
By now, the employer may be exhausted with all these requirements—but there's no resting yet, if the company does business in a jurisdiction with a local ban-the-box law.
A Los Angeles ordinance, which was enacted before the statewide law, applies only to businesses with 10 or more employees, but the requirements are slightly different from those under state law. For example, an employer may not take adverse action unless it follows the city's "Fair Chance Process," which includes conducting a written assessment that links the applicant's criminal history with the risks associated with the position sought. Among other things, the employer must notify the candidate in writing of the proposed adverse action and also provide a copy of the written assessment, Mora said.
The employer must hold the job open for five business days and allow the applicant a chance to respond with additional information. The employer must perform a written reassessment in light of the new information and follow additional steps before making a final adverse decision. Covered businesses in Los Angeles must comply with both city and state law.
It's a good idea for employers to conduct an audit of their background-check
procedures, to make sure they're getting everything right.
Mora advises gathering all documents related to the background process and
having counsel take a look at them.
According to Evans, employers should ask themselves why they're conducting background checks. He also suggests reviewing the relevant forms to ensure they comply with the wide range of laws. In addition, companies should determine whether they will use the same process nationwide—by complying with the most restrictive laws and using those procedures across the country—or whether their processes will vary based on the jurisdiction in which they operate.
Toni Vranjes is a freelance business writer in San Pedro, Calif.