Background Checks Handbook Statement: California

Author: Amy E. Mendenhall, Marissa L. Dragoo, Corinn Jackson, and Judith A. Paulson, Littler

When to Include This Statement

California employers should consider including this statement in their handbook to provide notice to new hires and existing employees that they conduct background checks and do so in a manner that is compliant with applicable federal, state and local laws.

Customizable Handbook Statement

Background Checks

The Company recognizes the importance of maintaining a safe, secure workplace with employees who are qualified, reliable, and nonviolent, and who do not present a risk of serious harm to their coworkers or others. To promote these concerns and interests, the Company reserves the right to investigate an individual's prior employment history, personal references, and educational background, as well as other relevant information. Consistent with legal or contractual requirements, the Company also reserves the right to obtain and to review an applicant's or an employee's criminal conviction record, and related information, and to use such information when making employment decisions, but only to the extent permissible under applicable law.

A pending criminal matter may be considered in appropriate circumstances for business-related reasons, consistent with applicable law. All background checks will be conducted in strict conformity with the federal Fair Credit Reporting Act (FCRA), applicable state fair credit reporting laws, and state and federal antidiscrimination and privacy laws. The Company is an equal opportunity employer and will comply with applicable federal, state and local laws relating to the use of background checks for employment purposes.

Guidance for Employers

  • The main reasons for conducting background checks on prospective and current employees are: (1) to confirm the applicant's education and work history; (2) to avoid loss to the employer from theft and other crimes resulting from employee dishonesty; (3) to minimize the risk of workplace violence; and (4) to minimize the risk of lawsuits involving claims of negligent hiring or retention. Employers may also be required by state or federal law to conduct background checks for employees in certain positions and/or industries.
  • Exercise extreme caution when implementing a third-party background check to ensure the process is legally compliant. The federal Fair Credit Reporting Act (FCRA), California's Consumer Credit Reporting Agencies Act (CCRAA) and the California Investigative Consumer Credit Reporting Agencies Act (ICCRAA) impose several requirements that apply to background checks, including specific disclosures and notices that must be provided to applicants or employees and authorizations that must be obtained from applicants or employees before the background check.
  • Failure to comply with background check requirements can result in litigation, including on a class-wide basis. For assistance determining the applicability of the FCRA, CCRAA and ICCRAA, and preparing forms and procedures compliant with those laws, consult legal counsel.
  • The CCRAA places limitations on when private employers, except for certain financial institutions, may lawfully use consumer credit reports in connection with hiring and personnel decisions. Specifically, private employers are permitted to use consumer credit reports only if the individual is applying for, works in or will work in the following positions:
    • A managerial position (as the term elsewhere is defined by California law);
    • A position for which the employer is required by law to consider credit history information;
    • A position that affords regular access to bank or credit card account information, Social Security Numbers and dates of birth, provided, however, that the access to this information does not merely involve routine solicitation and processing of credit card applications in a retail establishment;
    • A position in which the individual is or will be a named signatory on the bank or credit card account of the employer and/or authorized to transfer money or authorized to enter into financial contracts on the employer's behalf;
    • A position that affords access to confidential or proprietary information; or
    • A position that affords regular access during the workday to the employer's, a customer's or a client's cash totaling at least $10,000.
  • The definition of "management" is very specific and does not include just any supervisor. The employee must be a salaried exempt employee covered by the "executive exemption" under California Wage Order 4. Employers may not conduct credit checks on supervisors who do not qualify for the California executive exemption. Because the definition of "managerial position" under AB 22 specifically states that it applies only to Wage Order 4 executives, there are a great number of companies that can no longer conduct credit checks on managers.
  • Be cautious in using background checks when reviewing potential or existing employees for an employment position.
  • Blanket hiring restrictions based on criminal convictions should generally be avoided, and employers may want to include a statement in their job application indicating that convictions will not necessarily preclude employment.
  • The Equal Employment Opportunity Commission (EEOC) has issued guidance on an employer's use of arrest and conviction records as they relate to discrimination under Title VII. A copy of the guidance is available on the EEOC's website. (http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm).
  • Among other things, the EEOC takes the position that employers should not make employment decisions based on arrests alone and should not ask about criminal convictions at the application stage. From the EEOC's perspective, an employer may not rely on arrest records alone to deny employment, but an employer may consider the underlying conduct related to the arrest if that conduct makes the person unfit for a particular position. With regard to screening applicants on the basis of criminal convictions, the EEOC explains that an "employer needs to show that the policy operates to effectively link specific criminal conduct and its dangers with the risks inherent in the duties of a particular position."
  • In addition to the EEOC's scrutiny of employers' use of criminal history in making employment decisions, there is a growing patchwork of state and local laws regulating the scope of criminal history information an employer can request from applicants and the timing of such inquiries. For questions regarding state law limitations on preemployment criminal history inquiries or for advice on how to craft background check policies and procedures that lessen the risk of the EEOC's scrutiny while also meeting the company's operational needs and security concerns, consult with legal counsel.

Additional Resources

Credit Check Limitations by State

Ban the Box Laws by State and Municipality