This last month, San Francisco joined several cities and states by adopting "ban the box" legislation called the Fair Chance Ordinance ("Ordinance"), which limits the timing and scope of inquiries into an applicant's or employee's criminal history. The Ordinance not only bans any inquiry into criminal history information on job applications, but places significant additional restrictions on an employer's ability to obtain and use that information in the hiring process.

On February 14, 2014, San Francisco Mayor Edwin Lee signed into law the Ordinance, which applies to private employers with 20 or more employees, regardless of their location. The Ordinance regulates only those employees whose duties are performed in whole or in substantial part within San Francisco city limits. The Ordinance has a delayed effective date of August 13, 2014, and will be enforced by the San Francisco Office of Labor Standards Enforcement ("OLSE").

Some employers will be exempt from the Ordinance to the extent that they are required by federal or state law, or an agency implementing these laws, to conduct background checks. For example, despite the Ordinance, a community care facility would continue to conduct expansive background checks of applicants consistent with state law.

The City Deconstructs the Traditional Hiring Process

Generally, the Ordinance prohibits employers from requesting an applicant to disclose on an employment application or during a first interview (regardless of whether the interview is conducted via telephone, through the use of web technology, or in person) any details concerning a conviction or unresolved arrest. Employers may inquire about an applicant's criminal history only after the first interview or after a conditional offer of employment.

This Ordinance also prohibits employers from at any time inquiring into or taking an adverse action based on any of the following:

• an arrest not leading to a conviction;

• participation in or completion of a diversion or a deferral of judgment program;

• a conviction that has been judicially dismissed, expunged, or otherwise rendered inoperative;

• a juvenile conviction;

• a conviction that is over seven years old from the date of sentencing; or

• an offense that is other than a felony or a misdemeanor.

It should be noted that California law already prohibits inquiries into certain categories of criminal history, but the Ordinance goes much further, particularly in its focus on when the conviction occurred. The Ordinance requires an employer to provide notice to applicants or employees of their rights prior to any inquiry into their conviction history. This notice will be published and disseminated by the OLSE.

Individualized Assessment Is Required Before Taking Adverse Action

Before an employer refuses to hire or takes any other adverse action based on an applicant's or employee's conviction history, the employer must conduct an individualized assessment considering only a "directly-related conviction," defined as conduct having a direct and specific negative bearing on that person's ability to perform the duties or responsibilities necessarily related to the job. One consideration is whether the position offers the opportunity for the same or similar offense to occur and whether circumstances leading to the conduct for which the person was convicted will reoccur. This individualized assessment also requires consideration of the time that has elapsed since the conviction and any evidence of inaccuracy, rehabilitation, or other mitigating factors.

If, after conducting the assessment, the employer intends to take an adverse action based on the applicant's or employee's conviction history, the employer must provide a copy of the background check report or conviction report that it is relying on, if any, and it must notify the applicant or employee of the prospective adverse action and the reasons for such action.

The employer must then wait seven days for the applicant or employee to provide a response, either orally or in writing, regarding any evidence of inaccuracy, rehabilitation, or mitigating factors. Upon receiving such response, the employer then must wait an additional reasonable time (five or more days) to reconsider the prospective adverse action in light of the new information. After the employer has allowed the employee adequate time to respond to the prospective adverse action, the employer may take a final adverse action based upon the conviction history but must notify the employee that the final adverse action was taken because of the conviction history.

The procedure for the individual assessment will be scrutinized by the OLSE, and the employer should take due care in documenting each step of this process. Notably, however, the Ordinance prevents the OLSE from finding a violation based on an employer's decision that an applicant's or employee's criminal history involves a "directly-related conviction."

Anti-Retaliation Protections

The Ordinance makes it unlawful for an employer to retaliate against an employee or applicant for exercising protected rights under the Ordinance. Significantly, a presumption of retaliation is created if an adverse action is taken against an employee or applicant within 90 days of an exercise of a right under the Ordinance. This creates fertile ground for challenging decisions not to hire or promote through administrative claims before the OLSE, or private actions for common law wrongful termination based on the alleged infringement of rights under the Ordinance.

Disclosure, Posting, and Notice Requirements

Similar to other San Francisco ordinances, the Ordinance contains notice and disclosure requirements. Yet, the Ordinance goes one step further and requires a covered employer to state in all job solicitations or advertisements that the employer will consider qualified applicants with criminal histories in a manner that is consistent with its provisions.

The Ordinance also requires employers to post a notice published by OLSE that informs applicants and employees of their rights under the Ordinance. The notice must be published in English, Spanish, and Cantonese/Mandarin, and any other languages spoken by more than 5 percent of the employer's San Francisco workforce. Employers must post these notices in a conspicuous place at every workplace, job site, or other location in San Francisco under the employer's control that is frequently visited by employees or applicants. An employer also will need to distribute notices to any labor union representing its workers.

Recordkeeping Requirements

Employers are also required to retain for a period of three years employment application forms, interview notes, criminal background reports, and applicant responses to inquiries and prospective adverse actions. Employers are required to provide information to the OLSE on an annual basis to verify its compliance with the Ordinance. Any failure to maintain these documents will result in the presumption that the employer was not in legal compliance.

Repercussions

As noted, the Ordinance precludes the OLSE from questioning the employer's decision to not hire an individual because of his or her properly considered conviction history. However, the notice, documentation, and procedural requirements will be highly regulated by the OLSE.

For any violation within the first 12 months following August 13, 2014, the OLSE may issue warnings and notices to correct the violation. For a second violation, the OLSE may impose an administrative penalty of no more than $50 for each employee or applicant as to whom the violation occurred. Thereafter, each subsequent violation will result in a $100 penalty payable to the City. If multiple employees or applicants are subject to the same procedural violation at the same time, the violation will be treated as a single violation.

The City may bring a civil action against employers seeking legal or equitable relief, including reinstatement, back pay and benefits, and injunctive relief, as well as reasonable attorneys' fees and costs.

What Employers Should Do Now

The Ordinance significantly impacts all aspects of the hiring process. Therefore, covered employers should do the following:

• Review and, if necessary, revise your hiring policies and practices, including job applications, job postings, and disclosure and authorization forms, to make sure that they comply with the Ordinance.

• Post and distribute all required notices published by the OLSE.

• Develop strict policies and protocols for conducting interviews, inquiring into criminal history, conducting individualized assessments, obtaining information that mitigates the conviction history of an applicant, and retaining documents.

• Train hiring personnel as to what questions may be asked during the initial interview and how to process an individualized assessment when evaluating an applicant's conviction history.