California Cracks Down on Employers’ Use of Criminal Background Information

By Kate S. Gold and Jessica A. Burt

California employers using employees’ criminal convictions to make employment-related decisions should be aware of the recent flurry of new regulations and pending state legislation that place increased limitations on employers’ use of such information.

New FEHC Regulations Prohibit Consideration of Criminal History When Doing So Has An Adverse Impact On Individuals in A Protected Class

California’s Fair Employment and Housing Commission (FEHC) issued new regulations on employers’ use of criminal background information when making employment decisions, including hiring, promotion, discipline, and termination. The new regulations take effect on July 1, 2017, and are intended to clarify how the use of criminal background information may violate the provisions of the Fair Employment and Housing Act (“FEHA”).  The regulations prohibit employers from seeking or using any criminal history information that has an adverse impact on an individual within a protected class, such as race, national origin or gender. The new regulations provide that an adverse impact may be established through the use of state or national level statistics or by offering “any other evidence” that establishes an adverse impact.

If an employee or job applicant can demonstrate that an employer’s criminal background check policy or practice creates an adverse impact, the burden shifts to the employer to prove that the policy or practice is nonetheless justifiable because it is: (1) job-related and (2) consistent with business necessity. The criminal conviction policy or practice must bear a demonstrable relationship to successful performance on the job and measure the person’s fitness for the specific position, not merely evaluate the person in the abstract.  An employer must demonstrate that the criminal background check policy is “appropriately tailored” to the job, taking into account: (i) the nature and gravity of the offense; (ii) the amount of time that has passed since the offense and/or since the sentence for the offense was completed; and (iii) the nature of the job the employee holds or seeks.

An employer can demonstrate that its policies or practices are “appropriately tailored” to the job by either: (1) conducting an individualized assessment of the circumstances and qualifications of the applicant or employee and providing the individual with notice (before any adverse action is taken) that he or she has been excluded based on a conviction and affording the individual an opportunity to show that the criminal history exclusion should not apply due to their particular circumstances; or (2) demonstrating that a “bright line” rule regarding conviction disqualification can distinguish between those employees who actually pose an unacceptable risk and that the convictions being used to disqualify, or otherwise adversely impact the status of the employee or applicant, have a direct and specific negative bearing on the person’s ability to perform the duties or responsibilities necessarily related to the position.

The new regulations further provide that any bright-line policy that includes conviction-related information that is seven or more years old is subject to a rebuttable presumption that the policy is not specifically tailored to meet the job-related and consistent with business necessity defense.

Under the new regulations, even if an employer’s background check policy meets the new stringent standard, employers may still be liable if an individual employee can demonstrate that there is a less discriminatory policy or practice that serves the employer’s goals as effectively, such as a more narrowly targeted list of convictions or another form of inquiry that evaluates job qualification or risk as accurately.

Employers that are required to comply with federal or state laws or other regulations that mandate a criminal history screening process or require an employee or applicant to possess or obtain a required occupational license can rely on the applicable laws as a defense to an adverse impact claim.

The Regulations Require Employee Notification of an Adverse Action and Opportunity to Present Evidence of Factual Inaccuracy

The federal Fair Credit Reporting Act currently requires employers to provide notice to employees or job applicants when an adverse employment decision is made based on information obtained by an employer through a background check. In addition, the FEHC’s new regulations require that employers notify an employee or applicant of the disqualifying criminal conviction if the information was obtained from any source other than the applicant or employee (e.g., through a consumer report or internally generated search).

Under the regulations, the employee or applicant must be given a “reasonable opportunity to present evidence that the information is factually inaccurate,” and the criminal record may not be considered if the employee establishes that the information is inaccurate.

Similar Pending California Legislation

Employers should also note that pending Assembly Bill (AB) 1008 goes even further than the FEHC regulations and would make it unlawful for a California employer to: (1) include on any job application questions that seek the disclosure of an applicant’s criminal history; (2) inquire or consider an applicant’s prior convictions before extending a conditional offer of employment; and (3) when conducting a criminal background check, to consider, distribute, or disseminate information on (i) an arrest not followed by conviction, (ii) referral to or participation in a pretrial diversion program, (iii) convictions that have been sealed, dismissed, expunged, or statutorily eradicated pursuant to law, (iv) misdemeanor convictions for which no jail sentence can be imposed, or (v) misdemeanor convictions for which three years have passed since the date of conviction or felony convictions for which seven years have passed since the date of conviction.

If passed, AB 1008 would also require California employers that intend to deny employment to an applicant because of prior convictions to perform an individualized assessment of whether the applicant’s criminal history has a direct and adverse relationship to the specific job duties. The employer must then notify the applicant of the reasons for the decision and provide the applicant with 10 days to respond and challenge the accuracy of the information or provide evidence of rehabilitation, which the employer must then consider before making a final employment decision.

The bill is scheduled for a hearing before the California Committee on Labor and Employment on May 3, 2017.

Best Practices for California Employers Conducting Criminal History Checks

California employers that screen applicants and employees for criminal convictions should review and evaluate their criminal conviction policies, background check policies, and job applications for compliance with the new regulations and, potentially, for compliance with pending AB 1008.