Seyfarth Synopsis: As the number of class actions alleging FCRA violations continues to skyrocket, it is critical for California employers to understand the basics of all laws affecting employment screening programs. This blog examines those laws and provides practical considerations for employers looking to hire or rehire employees during a shutdown affecting critical sources of information needed for background checks.
While Covid-19 has inspired shutdowns of many businesses, “essential businesses” in the retail and healthcare industries and elsewhere need to hire employees as fast as ever. These companies face a problem: the shutdowns have limited public access to the most common sources of information for background checks. What are California employers to do when needing to onboard employees pending completion of a background check in the face of a pandemic?
California is notoriously rife with regulation as to how employers may obtain and consider background check information for hiring and personnel decisions. (California also regulates employer use of credit reports for employment purposes. For more on Lab. Code § 1024. 5, see our blog California Employers: Beware The Background Check Bugaboos.) Given the risk of litigation in an environment where such claims have skyrocketed, we begin by reviewing the technical requirements employers must follow when ordering background checks and making decisions based on the information they contain, and we then address practical steps to take.
The FCRA Applies—Even During a Pandemic
Don’t ignore federal and state background check laws while waiting for the dust to settle on this pandemic! Here is what employers need to know about these requirements.
Generally speaking, before an employer may obtain a background check (also called a “consumer report”) from a third-party background check provider (also called a “consumer reporting agency”), the employer must make a clear and conspicuous written disclosure to the individual that a background check may be done. In fact, the document must consist “solely” of the disclosure. California’s fair credit reporting statute also requires a separate, stand-alone disclosure, which cannot be combined even with the federal FCRA disclosure. The candidate or employee must also provide written consent for the employer to obtain a background check report. Different requirements exist for “investigative consumer reports” (those based on interviews of the individual’s friends, neighbors and associates), and for employers regulated by the Department of Transportation (depending on their hiring practices). Be sure to know what requirements affect you!
What if the background check raises a concern? Before taking any “adverse action” (such as rescinding a conditional job offer or discharging an employee), the employer must provide the individual with a “pre-adverse action” notice and a copy of the report and the Consumer Financial Protection Bureau’s Summary of Rights. This notice gives the individual an opportunity to discuss the report with the employer before the employer takes an adverse action. Once the employer is prepared to take the adverse action, it must then give the individual an “adverse action” notice, containing certain FCRA-mandated text.
What if an employer orders a background check on a current employee and discovers a disqualifying conviction? The employer cannot immediately dismiss the employee. Even in those circumstances, the employer still must provide the employee with a pre-adverse action notice. But the employer must also decide whether to allow the employee to continue to work or place the employee on an administrative leave pending the waiting period. Both options pose risks, and employers faced with this scenario should work with experienced counsel before proceeding.
California employers that utilize criminal history information for employment purposes must also consider state and local laws that impose additional compliance obligations, regardless of whether the information comes through a consumer reporting agency.
California’s Ban-the-Box Law Restricts Uses of “Criminal History”
California’s statewide ban-the-box law (Gov’t Code § 12952) requires employers with five or more employees (subject to few exceptions) to follow certain procedures when requesting and using criminal history information for pre-hire purposes. Specifically, regardless of the source of the criminal history information, employers must:
- Wait until after a conditional offer of employment to inquire about criminal history. This requirement applies to asking candidates directly whether they have been convicted of a crime, to ordering a criminal history background check, and to making any other inquiry about a candidate’s criminal history.
- Conduct an individualized assessment of a candidate’s conviction to determine whether the conviction has a “direct and adverse relationship with the specific duties of the job that justify denying the applicant the position. ” California law does not require employers to provide the candidate with their assessment.
- Notify the applicant of any potential adverse action based on the conviction history. The notice must identify the conviction, include a copy of any conviction history report (regardless of the source), and state the deadline for the candidate to provide additional information, such as evidence of inaccuracy, rehabilitation, or other mitigating circumstances.
- After waiting the requisite time period, notify the candidate of any final adverse action, of any existing procedure the candidate has to challenge the decision or request reconsideration, and of the candidate’s right to file a complaint with the Department of Fair Employment and Housing.
Note: the California notices are required even if the employer doesn’t order criminal background check reports from a consumer reporting agency, but instead learns of the criminal history from a different source (such as a candidate self-disclosure). This California peculiarity differs from the FCRA pre-adverse and adverse action notices, which are required only if the adverse decision is based on information obtained from a background check report from a consumer reporting agency.
Substantively, a wide range of criminal records are off-limits to California employers (unless the employer qualifies for very narrow exceptions identified in the Labor Code). Records that cannot be used are:
- arrests that did not lead to a conviction,
- non-felony marijuana convictions that are older than two years,
- juvenile records, and
- diversions and deferrals.
As if California laws weren’t challenging enough, employers hiring in Los Angeles and San Francisco must also look to the ban-the-box ordinances of these jurisdictions, which contain even more requirements. Our previous blog on the specific requirements in Los Angeles and San Francisco can be found here.
COVID and Background Checks
How does COVID factor into all of this? Unfortunately, the sources of information that typically appear in background checks are now quite hard to access. Many courts, businesses, and schools are either closed or limiting access to information, thereby challenging background check providers that want to check public records and verify educational credentials and prior employment. As a result, reports may show search categories as “pending,” leaving the employer in the dark about a candidate’s background.
Employers confronted with this dilemma have a few issues to consider:
- Should the employer change the types of information it orders from a background check provider? For example, employers may consider foregoing an educational and employment verification check, but continuing with a criminal history or motor vehicle records check. Likewise, employers that have created new driving positions to deliver their goods directly to consumers during the pandemic might consider adding a motor vehicle records check to their process.
- If the “pending” item relates to criminal history, are there ways to expedite this search? If the only “pending” item in the background check relates to a criminal record search, one option is to also present candidates with a post-offer criminal history questionnaire, which asks the candidate to self-disclose their criminal history (e. g. , “have you been convicted of a crime?”). If an employer elects this option, it should ensure that the form instructs candidates of the types of information they need not disclose (e. g. , non-convictions, non-felony marijuana convictions older than two years, etc. ), and requires the candidate to verify the accuracy of the information reported in the event the completed background check reveals a conviction that should have been reported.
- Will employers allow candidates to start work before completion of their background check? California law does not prohibit employers from onboarding candidates pending their background checks. But employers might be reluctant to do so because they know nothing about the candidates’ backgrounds, and cannot assess whether the candidates will pose a risk to property, employees, or customers. If an employer decides to onboard a candidate pending the background check, the employer should state in the offer letter that the background check might not be cleared before the applicant starts work and that employment remains contingent on the employer receiving satisfactory results, whenever that might be.
- Can employers dismiss employees because of background checks? As explained above, the FCRA and California law require a two-step notice process before rejecting candidates or dismissing employees based in whole or in part on information revealed in the background check report. Accordingly, employers cannot summarily dismiss employees because of an unsatisfactory background check, even if the offer letter is clear that employment remains contingent on the background check results.
- If an employee works for a while without incident, how should negative information ultimately revealed in the background check be evaluated? Whether employers are evaluating criminal records pre-hire or during employment, employers should always conduct individualized, job-related assessments before taking action against someone because of that record. An important consideration in that assessment is the individual’s employment history since the conviction. If an employer hires an employee with a pending criminal history background check but later discovers the employee has a conviction, the employer must consider the employee’s job performance during this waiting period as part of the job-related assessment.
- If an employee returns from a leave of absence or a furlough, should the employer order a new background check? A lot has happened during the last several months, and it may well be that returning employees might have been convicted of a crime while on leave or furlough. California employers can rescreen returning workers. But employees should first consider reviewing their disclosure and authorization process to confirm that they still comply with the FCRA and California law. As we previously reported here, the Ninth Circuit continues to issue decisions against employers over hyper-technical defects in their disclosure forms.
California Workplace Solutions
Class actions against employers for failing to follow background check requirements have become notorious and we don’t see that trend changing even after the pandemic. Thus, California employers will want to conduct (privileged) assessments to strengthen their compliance with the myriad laws that regulate the use of an individual’s criminal history. Suggested next steps include:
- Assess coverage under the California, Los Angeles, and San Francisco ban-the-box laws.
- Review job advertisements and postings both for unlawful and mandatory language regarding criminal history.
- Review job applications and related forms for unlawful inquiries regarding criminal history.
- Train employees who conduct job interviews and make or influence hiring and personnel decisions, regarding inquiries into, and uses of, criminal history, including best practices for documentation and record retention.
- Review the hiring process to ensure compliance, including the timing of criminal history background checks, the distribution of mandatory notices, and the application of necessary waiting periods.
More specific to the COVID pandemic, employers that onboard employees pending completion of their background check also should consider:
- Modifying offer letters to explain to new employees that their continued employment remains contingent on successful completion of the background check, regardless of when the check clears.
- Periodically checking with background check providers regarding the status of pending background checks.
- Providing a new background check disclosure and obtaining another authorization from an employee if the delay might result in ordering a new check or if the employer is re-screening employees returning from a leave of absence or furlough.
- Preparing for the possibility that action might need to be taken against a current employee because of information in a background check report.