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Complying with Employee Background Checks in California

Employers, including manufacturers throughout Southern California, today are faced with a number of employee-related exposures that include falsified credentials, embezzlement, workplace violence and lawsuits that result from bad hiring decisions. To improve their risk profile, many manufacturers contract out/conduct employee background checks as part of their hiring process. It’s important that when requesting/performing background checks that, as an employer, you understand the national standards as set by the Federal Fair Credit Reporting Act (FCRA) as well as California state law.

Under the FCRA, national standards apply when an employment background check is prepared by an outside screening company that you hire. When a third party compiles a report, the FCRA requires:

(1) that an potential employee is notified that an investigation may be performed

(2) that the employee is given the opportunity to consent, and

(3) that the employee is notified if information in the report is used to make an “adverse” decision.

With regard to this last point, for job applicants, an “adverse action” means an employer has decided not to hire the individual based on the information in the report. For existing employees, an adverse action might mean termination, or it could be a decision to not promote the individual or to demote him or her. The individual must also receive a second notice after an adverse action, providing information on how to dispute inaccurate or incomplete information. In addition, specific permission from the individual must be obtained if medical information is requested.

California Law – Background Checks

Under FCRA and California law, you must obtain written authorization from a job applicant and employees before beginning the investigation process through a screening agency. Also, as with the FCRA, California law requires specific authorization from the individual if information about his or her medical history or condition will be obtained. There are certain differences as well.

First, in California, an employment background check is called an “investigative consumer report” (ICR). While these reports under the FCRA are limited to personal interviews with friends, neighbors or business associates, in California, an ICR covers an individual’s “character, general reputation, personal characteristics, or mode of living” obtained through “any means.” Moreover, a job applicant in California or current employee receives a more extensive notice than the one required under the FCRA. In California, before a background check is conducted by an outside screening company, an individual will receive a notice that:

  • States the purpose of the report.
  • Provides the name, address, and telephone number of the screening company.
  • Includes a summary of the employee’s rights to see and copy any report about him or her
  • Includes a box to check if the employee wants a copy of the employee report.

An employer must also provide the applicant or existing employee with the Internet website address or telephone number of the screening company. The screening company must post its privacy practices on the company’s website. If the company does not have a website, an individual can request that a copy of the privacy policy be sent.

If the individual wants a copy of his or her report, it should be sent within three business days of the date your company receives it. The report may come from you as the employer or from the screening firm. As an employer, if you choose to conduct a background check without using an outside firm, the job application form or a related document must include a box that allows the individual to indicate that he or she wants a copy of public records obtained in the investigation.

Additional Considerations

Along with these federal guidelines, there are a growing number of state laws that restrict or prohibit the use of criminal background checks specifically. The most aggressive of these laws is called “ban the box” and prohibits employers from asking about potential employees’ conviction records. There are a total of 24 states representing nearly every region of the country that have adopted the “ban the box” policy including California. The “ban the box” laws typically do not prevent a company from ever asking about a candidate’s criminal history during the hiring process. Rather, they seek to move the question out of the job application stage in hopes of avoiding discrimination.

As you can see, compliance with employment background checks is complex and involves understanding both federal and state law. Non-compliance can land your manufacturing firm in litigation for an employment practices violation. Precision Manufacturing Insurance Services (PMIS) specializes in safeguarding the manufacturing industry throughout California with comprehensive insurance programs, including Employment Practices Liability Insurance (EPLI), as well as HR services that include hiring best practices and the development of a strong employee handbook. To learn more about our products and services and how we can assist you in mitigating potential employee-related claims and other risks, contact us at 855.910.5788.

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