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.

Philadelphia Significantly Expands Its “Ban the Box” Ordinance

By Dennis Mulgrew

A growing number of jurisdictions around the country have enacted so-called “ban the box” laws, which limit employers’ ability to inquire about and/or consider applicants’ criminal records when making employment decision.

In 2011, Philadelphia enacted the Fair Criminal Records Screening Standards Ordinance, its version of “ban the box.” This past week, the ordinance was amended to significantly expand the scope of prohibited activity and the protections provided to applicants, in the following respects:

  • Covered Employers – The amended ordinance covers private employers employing any persons within Philadelphia, whereas the previous version applied only to those with ten or more employees.
  • Timing of Criminal Record Inquiry – Employers may now conduct a criminal background check only after a conditional offer of employment has been made, whereas previously employers were permitted to conduct the check after an application was received. Further, the revised ordinance prohibits employers not only from asking for specific criminal history information, but also about “the applicant’s willingness to submit to a background check” at a later date.
  • Individualized Assessment Requirement — The amended ordinance now imposes an “individualized assessment” requirement, pursuant to which an employer may only reject an applicant if his or her criminal record includes “conviction for an offense that bears such relationship to the employment sought that the employer may reasonably conclude that the applicant would present an unacceptable risk to the operation of the business or to co-workers and customers, and that exclusion of the applicant is compelled by business necessity.” In determining the “risk,” an employer must consider as part of the “individualized assessment” the nature of the offense; the time passed since the offense; the job duties of the particular position sought; the applicant’s employment history before and after the offense; any character or personal references provided by the applicant; and evidence of rehabilitation since the conviction.
  • Job Applications – The previous version of the ordinance prohibited employers from making any criminal history inquiries in a job application. The amended ordinance clarifies that the text of a job application may not include such an inquiry “whether or not certain applicants are told they need not answer the question.” Essentially, this provision means that multi-state employers cannot use applications containing a criminal history request even if the application specifically directs Philadelphia applicants not to answer the question.
  • Time Limits — Employers may only consider convictions occurring within the last seven years, excluding periods of incarceration.
  • Applicant Notification — Employers must provide written notification to applicants that are rejected based on their criminal background (including a copy of the applicant’s criminal history report), and must allow the applicant ten business days to provide “evidence of the inaccuracy of the information or to provide an explanation.”
  • Private Right of Action – The amended ordinance provides for an administrative complaint process, to be administered by the Philadelphia Commission on Human Relations, with a private right of action after administrative remedies have been exhausted. Further, in the event of a violation, a court “may grant any relief it deems appropriate,” including compensatory damages; punitive damages; reasonable attorneys’ fees; court costs; and injunctive relief.
  • Posting Requirements – Employers must post a summary of the ordinance’s requirements “in a conspicuous place on the employer’s website and premises” in a “form to be supplied by the Commission.” (Note that the Philadelphia Commission on Human Relations has not yet issued a sample poster for the revised ordinance).

Although styled as an “amendment,” the revised ordinance imposes significant new requirements on employers and, most importantly, provides applicants a private right of action in court in the event of a violation. In advance of the ordinance’s effective date of March 14, 2016, employers should carefully review their current screening and application processes to ensure compliance with not only Philadelphia’s ordinance, but also other applicable statutes such as the federal Fair Credit Reporting Act and the Pennsylvania Criminal Records Act.