When May Employers Run Background Checks?

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Employers may generally conduct background checks if you consent to them. An investigation of background history falls into three major areas (1) criminal, (2) employment, and (3) credit/financial.

Criminal Background Checks

California law allows background checks to report arrest and criminal charges for up to seven years before the date of the report, but only if a conviction resulted - arrests may not be reported to employers if they did not result in a conviction unless the criminal charges are still pending at the time of the report. ICRAA, Cal. Civ. Code 1786.18. California law also only allows reporting criminal convictions for up to seven years from the date of the conviction, except for some state agencies as required for licensure and operators and employees of residential care facilities for the elderly. California law prohibits employers from asking about arrests that did not result in a conviction, arrests for which pretrial diversion was completed, and records relating to sealed, expunged, or dismissed criminal proceedings.

A new law SB 530 amended California Labor Code section 432.7 on January 1, 2014.  Before January 1, 2014, section 432.7 prohibited public and private employers from asking job applicants about arrests that had did not result in a conviction and arrests that resulted in a diversion program. The law carried a penalty of $500 or treble actual damages, whichever is higher, and reasonable attorney fees and costs.  The revised version of section 432.7 effective January 1, 2014 further prohibits employers from asking about convictions that have been expunged, sealed or dismissed and leaves the  penalties the same.

Medical and Psychological Examinations

California law generally prohibits an employer from requiring any medical or psychological examination or inquiry of a job applicant including requiring a description or information about the nature and severity of a mental or physical disability or medical condition.  An employer may legally inquire into the ability of an applicant to perform job-related functions.

Once the employer has offered the applicant a job, it may require a medical or  psychological examination if the examination or inquiry is job-related and consistent with business necessity and the employer requires the same examination or inquiry for all employees entering into the same job classification.

Investigations into Character and Mode of Living

California Civil Code 1786 contains additional protections for employment background checks and California's law also applies to employers who conduct their own investigative consumer report, which includes reporting on the employee or job applicant's character, general reputation, personal characteristics, or mode of living obtained by any means.  FRCA does not treat employer conducted character investigations as an FRCA-covered investigation.

Employers are not required to give employees or applicants information the employer obtained by checking employment referenceees or interviewing neighbors, friends, colleagues, etc.

Recently in Sweet v. LinkedIn Corp. Magistrate Judge Paul S. Grewal in the Northern District of California found that a LinkedIn reference search was not an investigation covered by FRCA and granted a motion to dismiss.  Sweet v. LinkedIn Corp., 5:14-cv-04531-PSG (Dist. ND April 14, 2015).

Credit and Financial Background Checks

The federal Fair Credit Reporting Act (FRCA) sets the standard for employment background checks relating to hiring, promotion, retention and reassignment and covering the credit and financial history.  FRCA is found at 15 USC 1681 et. seq.  FRCA only applies when the employer uses a third party to obtain conduct a background investigation or prepare a background investigation report.  If the employer conducts the investigation itself, FRCA does not apply.  FRCA requires that the employer notify the job applicant that an investigation may be performed, obtain the employee's consent to the investigation or report and inform the employee or applicant that the employer may use the report to make an adverse decision about him.  FRCA requires the employer to give a specific notice if the investigation will include interviewing neighbors, friends or associates about your character, reputation, personal characteristics, or mode of living.

FRCA generally prohibits the investigation firm from reoprting negative information that is more than seven years old except for bankruptcy information, which can be reported for up to 10 years.

If the report contains negative information, the employer must give the applicant or employee a pre-adverse action notice with a copy of the report to give the employee or applicant the opportunity to potentially correct any untrue information.

California's Consumer Credit Reporting Agencies Act (CCRAA) applies to employers who seek to obtain credit report information about potential or existing employees.  California Civil Code 1785.  CCRAA allows California employers to request a credit report only for certain positions and requires the employer to notify the employee or applicant and obtain her consent.  The only jobs for which an employer may require a credit check are jobs for:

  • Department of Justice
  • Managerial positions
  • Law enforcement
  • Information is required by law
  • Jobs with access to certain personal information
  • Jobs with named signatory power on employer's bank or credit card accounts
  • Job with access to confidential or proprietary information
  • Job involving regular access to $10,000 or more of cash

If an employer violates the ICRAA, the employee can sue for actual damages or $10,000, whichever is greater and may also obtain punitive damages for willful or grossly negligent employer behavior.

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