Seyfarth Synopsis:  The California Fair Employment and Housing Council (“FEHC”) has approved new regulations, effective July 1, 2017, to limit employers’ use of criminal history when making employment decisions.

New Regulation Highlights

Updating our prior post, the FEHC has finalized new regulations on employer consideration of criminal history, largely adopting the guidance set forth by the Equal Employment Opportunity Commission (“EEOC”) in its April 2012 “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964.”

• Expanding the Types of Criminal History Employers May Consider: Employers will be prohibited from considering any non-felony convictions for marijuana possession if the conviction is more than two years old. (Current California law prohibits asking applicants to provide information concerning convictions for marijuana-related offenses that are more than two years old; detentions or arrests not resulting in conviction (except for those pending); convictions that have been judicially dismissed or ordered sealed; and information concerning a referral to or participation in a work/education program as part of probation.)
• Requiring Notice to the Applicant/Employee of a Disqualifying Conviction and Providing a Reasonable Opportunity to Present Evidence of Factual Inaccuracy: Under the new regs, prior to taking adverse action, an employer must provide the applicant notice of the disqualifying conviction and give the applicant a reasonable opportunity to present evidence of factual inaccuracy. If the applicant produces such evidence, the conviction cannot be considered in the employment decision. The notice is only required when the criminal history is obtained from a source other than the applicant or employee (e.g., through a consumer report or internally generated search). This notice differs from the notice required by the Fair Credit Report Act (“FCRA”), which mandates notices only if the employer takes adverse action based on information contained in a third-party background check. This notice also differs from those in “Ban the Box” city ordinances, such as Los Angeles and San Francisco, where notice may be required if adverse action is taken from criminal history information from any source, including disclosure from the candidate.
• Prohibiting Consideration of Criminal History When Doing So Will Result in an Adverse Impact on Individuals Within a Protected Class: Employers will also be prohibited from considering criminal history if doing so will result in an adverse impact (referred to by the EEOC as “disparate impact”) on individuals within a certain class (e.g., race, national origin, etc.). The regs bring California into explicit alignment with federal law on this point. Applicants bear the initial burden of proof with respect to establishing that the employer’s background screening policy has an adverse impact on a protected class, e.g., conviction statistics or other types of evidence. If adverse impact is demonstrated, the burden shifts to the employer to demonstrate that its policy is “job related and consistent with business necessity,” and tailored to the specific circumstances, taking into account factors such as those set forth in Green v. Missouri Pacific Railroad, 549 F.2d 1158 (8th Cir. 1975), i.e.,: (i) nature and gravity of the offense or conduct; (ii) amount of time since the offense or conduct and/or completion of the sentence; and (iii) nature of the job held or sought. (Bright-line disqualification policies that include convictions that are older than seven years create a rebuttable presumption that they are not sufficiently tailored.) Even if an employer can demonstrate job-relatedness and consistency with business necessity, an applicant or employee can still bring a claim if they can show that there is a less discriminatory alternative (such as a narrower list of disqualifying convictions) that advance the employer’s legitimate concerns as effectively as the current policy or practice.

Employer Outlook

Employers in California should review their policies on use of criminal history in hiring and modify any practices to ensure compliance with the new FEHC regulation (as well as the FCRA and applicable municipal Ban the Box ordinances, such as Los Angeles and San Francisco).