California’s Office of Administrative Law has just approved an amendment to California’s Employment Regulations Relating to Criminal History and the amendment goes into effect October 1, 2023. 2 CCR 11017.1. This regulation is also known as California’s Fair Chance Regulation. It prohibits employers from considering non-conviction criminal history and it governs when and how an employer can consider conviction history. It imposes a three-stage interactive assessment process on employers. The Amendment expands upon these requirements in multiple ways. The Amendment also expands the definition of an “employer:”
“‘Employer’ includes a labor contractor and a client employer; any direct and joint employer; any entity that evaluates the application’s conviction history on behalf of an employer, or acts as an agent of an employer, directly or indirectly; any staffing agency; and any entity that selects, obtains, or is provided workers from a pool or availability list.”
The Civil Rights Council means for this to sweep up background screening companies. Lest you doubt me, here is a verbatim excerpt from the Council’s Final Statement of Reasons:
Comment: We urge the Council to adopt language in § 11017.1(i)(2) that further defines an “Employer” as: “(2) “Employer” includes . . . any entity that evaluates the applicant’s conviction history on behalf of the employer or acts as an agent of an employer, directly or indirectly. . . .” As the Council is aware, the [Fair Employment and Housing Act (“FEHA”)] defines an employer as “any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly. . . .” Gov. Code § 12926(d). A third party like a background check company may therefore be liable under FEHA where it exerts control over access to the job market or employment opportunities, and its discriminatory conduct interferes with an applicant’s access to the same and where it acts as an agent of the direct employer. FEHA makes it an unlawful practice for “any person to aid, abet, incite, compel, or coerce the doing of any acts forbidden under their part, or to attempt to do so.” Gov. Code § 12940(i). The clarification we suggest would ensure that these provisions apply to Fair Chance Act claims, as part of the FEHA.” [sic] (Emphasis added.)
Council Response: The Council agrees for the most part with this comment but proposes to adopt the slightly varied language suggested in the immediately preceding comment. (Emphasis added.)
See, Final Statement of Reasons at 46-47.
Background screening companies furnishing consumer reports on California consumers or to California employers should examine their services from the perspective of an “employer” to assess whether adjustments will need to be made. For example, employers are not permitted to inquire about criminal conviction history before a conditional offer of employment has been made. If a screening company is deemed to be an “employer,” that would seem to imply a screening company shouldn’t prepare a consumer report until after the employer has certified a conditional offer of employment has been made.
Another example: the Regulation prohibits inquiring about, distributing, or disseminating information regarding arrests not leading to conviction, pre and post-trial diversions, and similar non-conviction history. If a screening company is deemed to be an “employer,” does this mean it needs to instruct its public record researchers to be sure not to “inquire” about such information when visiting the courthouse and, further, never to report such information, even if reporting it isn’t prohibited by the Investigative Consumer Reporting Agencies Act?
A third example: The Regulation imposes detailed requirements on how the employer is to conduct a three-stage interactive assessment process before taking adverse action. If the background screener provides the service of adjudicating consumer reports using the employer’s criteria, will the expansive definition of “employer” under the Regulation extend liability to the screener for applying an adjudication matrix that fails to comply with the standard imposed by the Regulation? The standard requires the employer to demonstrate a “reasoned, evidence-based determination” and it proceeds to list an extensive set of factors that must or may be considered in making this determination.
A final example: The Regulation imposes a detailed, three-stage interactive assessment process on employers before taking adverse action. If an employer hires the background screening company to provide the administrative service of transmitting FCRA and ICRAA adverse action notices to the applicant and the employer does nothing else, will the background screener get dragged into the employer’s obvious non-compliance with the Fair Chance Regulation by virtue of (knowingly?) aiding non-compliance?
The commentary to this Amendment certainly suggests the Council thinks so.
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