the Basics of Employment Background Checks in California
Summary of the Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA) sets the national standard for employment background checks (15 U.S.C. §§1681 et seq.). It governs employment background checks for the purposes of "hiring, promotion, retention, or reassignment". The FCRA also covers the issuance of "consumer reports" (e.g. credit reports) for multiple purposes.
The federal FCRA applies when an employment background check is prepared by a screening company, defining such screening company as a Credit Reporting Agency (CRA). If an employer does not hire a CRA to conduct the investigation but rather compiles the report itself, the employer still remains subject to authorization and notice provisions of the FCRA.
When using a CRA to conduct background checks, the FCRA requires that the employer notify the applicant of the following: (1) an investigation may be performed, (2) the applicant has an opportunity to consent, and (3) information in the report may be used to make an "adverse" decision (i.e. a decision that negatively impacts the applicant).
Pursuant to the FCRA, negative information (e.g. information about arrests or charges) older than 7 years generally cannot be reported by a CRA. Bankruptcy information may be reported for 10 years. The FCRA allows for criminal convictions to be reported indefinitely.
Employers must provide an initial "pre-adverse action” notice along with a copy of the background report before taking any adverse action. For prospective employees, an "adverse action" means an employer has decided not to hire based on the information in the report. For existing employees, an adverse action may be termination, or a decision to demote or not promote. Employers must also provide a “final adverse action” notice once the adverse decision is made. Both the pre-adverse and final notices advise the applicant on how to dispute inaccurate or incomplete information.
The FCRA and California Law
The federal FCRA sets the minimum standards for rights and protections as related to employment background checks. State laws may give additional rights and protections to current and prospective employees; however, they cannot take away any of the basic rights provided under the FCRA.
California laws governing background checks require employers to follow the FCRA. In 2001, California amended its law to give job applicants and current employees broader rights than given under the FCRA. Applicant rights and an employer obligations are included in the Investigative Consumer Reporting Agencies Act (ICRAA) (CA Civil Code §1786).
As noted above, the FCRA allows employers to perform their own background screens. ICRAA expands its scope of authority on this subject. Along with rules for CRAs, it also establishes requirements for employers who conduct background checks themselves.
Some of the most obvious differences between the FCRA and the ICRAA are in the terminology used. Under ICRAA, a company that collects information for employers and compiles reports is called an Investigative Consumer Reporting Agency (ICRA). Additionally, an employment background check is called an "investigative consumer report" (ICR). The term ICR does not include credit reports.
Under the FCRA, an ICR is limited to personal interviews with your friends, neighbors or business associates. Under the ICRAA, an ICR includes "character, general reputation, personal characteristics, or mode of living" obtained through "any means."
Background checks conducted by an ICRA
When using an ICRA to perform background checks, the employer must provide a written notice and obtain written consent prior to starting the screening process. Additionally, an ICRA cannot perform the check unless the employer has certified that the report will only be used for a permissible employment purpose.
If the employee or applicant requests a copy of the report, a copy must be provided within three days of the employer receiving the report. The report must list the name, address, and telephone number of the ICRA that conducted the background check. The ICRA shall also provide the following notices on the first page of an ICR:
- A notice in at least 12-point boldface type setting forth that the report does not guarantee the accuracy or truthfulness of the information as to the subject of the investigation, but only that it is accurately copied from public records, and information generated as a result of identity theft, including evidence of criminal activity, may be inaccurately associated with the consumer who is the subject of the report.
- A notice that indicates the ICRA shall provide a consumer seeking to obtain a copy of a report or making a request to review a file, a written notice in simple, plain English (PDF) and Spanish (PDF) setting forth the terms and conditions of his or her right to receive all disclosures.
Can a CA employer run a check without authorization or notice?
An employer must gain authorization in writing before starting the investigation process through an ICRA. Written permission is required by the FCRA as well as the California ICRAA. California law requires specific authorization if information about medical history or condition will be obtained.
For screenings conducted by the employer, an application or other document may indicate that a background check will be conducted. This document must give the subject an opportunity to give up the right to obtain a copy of the public documents accessed for the internal report. Subjects of investigative reports have the right to obtain a copy of public records an employer gathers in the process of checking a background. An employer who violates the California ICRAA is subject to the same penalties that apply to an ICRA.
Is permission required each time an investigation is conducted?
California law requires notice and permission "at any time an investigative consumer report is sought for employment purposes other than suspicion of wrongdoing or misconduct." Therefore, in California, unless the employer is investigating based on suspicion, the employer must gain permission and allow the subject to obtain a copy of the report each time one is conducted.
Does an employer have to release all information it gathers to the applicant or employee?
No. The employer must only provide the applicant or employee with a copy of any public records obtained. This could include documents that pertain to an arrest (if it results in a conviction), indictment, conviction, civil judicial action, tax lien, or outstanding judgment. Such records can be obtained by an employer directly from the public source.
While most information compiled in a background check consists of public records, non-public record information might include reference checks with past employers and a verification of education credentials. Employers are not required to provide information received when checking references.
If an employer chooses to conduct a background check using an internal-screening method (rather than using an ICRA), the application or other document must allow (using a check box) the applicant to waive (i.e. give up) his/her right to get a copy of public records gathered. If the applicant does not waive the right, the employer must provide a copy of public records within seven days after receipt.
What does an employer have to provide if adverse employment action is taken?
An employer must provide a copy of the records if an adverse employment action is taken against the applicant or employee, even if the applicant waived the right originally (i.e. did not request a copy).
If the employer performs a background check based on suspected misconduct, the employer is only required to provide a copy of public records (1) after the investigation is completed and (2) if the employee did not earlier waive his/her right to a copy of the records.
What happens if the public records report contains inaccurate information?
The law is not clear on the dispute process if the employer conducts the investigation itself without using an ICRA. Applicants and employees should be advised to dispute in writing any inaccurate information compiled from public records found in the internal investigation.
What other laws apply to background checks?
Whether conducted in-house or through a third-party screener (i.e. a CRA or ICRA), state and federal discrimination laws apply. The issue may arise when a background check report includes a criminal record. As per the U.S. Equal Employment Opportunity Commission (EEOC), the use of criminal history may sometimes violate Title VII of the Civil Rights Act of 1964. This can happen, the EEOC says, when employers treat criminal history differently for different applicants or employees.
On April 25, 2012, the EEOC issued extensive guidelines for employers in considering the criminal history of a job applicant or employee. The EEOC cites the most important considerations as the following: (1) the nature and gravity of the offense (2) the time that has lapsed since the offense and (3) the nature of the job. To aid in compliance with Title VII, the EEOC guidelines provide employers with examples of best business practices. The EEOC’s guidelines, Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964, can be found at www.eeoc.gov/laws/guidance/arrest_conviction.cfm.
The California Labor Code prohibits an employer from asking about the following: 1) any arrest or detention that did not result in a conviction, 2) any arrest for which pre-trial diversion has been completed, and 3) criminal records that have been expunged, sealed or dismissed. The inability to ask these types of questions is more commonly referred to as “Ban the Box”.
Public sector employers (e.g. California state and local agencies, cities and counties, etc.) are prohibited from asking about criminal records on employment applications. Public sector employers must review an applicant's qualifications before inquiring about their conviction history.
Provisions of the Labor Code are reinforced in regulations of the California Department of Fair Housing and Employment. http://www.dfeh.ca.gov/res/docs/Council/ATTACHMENT_B_2_CCR_tit_2_div_4_6-18-13.pdf
A Department publication lists questions that are inappropriate for a California job applicant. www.dfeh.ca.gov/res/docs/publications/dfeh-161.pdf
Can a CA employer do background check that includes a credit report?
California employers are forbidden from accessing credit reports unless the job falls into one of the exceptions. Jobs that allow a credit check include, but may not be limited to, the following:
• A position in the state Department of Justice
• A managerial position
• A position as a sworn peace officer or other law enforcement job
• A position for which the information is required by law
• A position that involves access to specified personal information
• A position in which the person is a named signatory on the employer's bank or credit card account
• A position that involves access to confidential or proprietary information
• A position that involves regular access to $10,000 or more of cash
As an employer, you must give notice to the employee or applicant that a credit report will be ordered along with an explanation of what exemption allows such credit report access.
The full text can be found at: http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/ab_22_bill_20110920_enrolled.html
NOTE: This fact sheet is not intended to be legal advice. The information and references contained within the document are provided as a means to alert readers to their existence. To apply this information to specific situations, consider the need to consult with an expert in labor law. Always consult with your legal representative before making employment decisions.