Hiring the right candidate is an important step for any organization. However, employment background checks in California are heavily regulated, and employers must be careful about how and when they obtain, review, and use screening information.
Employers that rely on third-party background check vendors may still face liability if the screening process does not comply with both federal and California law. Even when a vendor conducts the background check, the employer remains responsible for ensuring the hiring process meets legal requirements.
This article outlines the key laws governing employment background checks in California and highlights practical compliance considerations for employers.
What Laws Govern Background Checks in California?
California employers must comply with several overlapping federal and state laws when conducting background checks during the hiring process. These laws are designed to protect applicant privacy while ensuring that screening information is used responsibly.
Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act is a federal law that regulates how employers obtain and use consumer reports for employment purposes when those reports are prepared by a third-party consumer reporting agency.
Under the FCRA, employers must:
- Provide a clear written disclosure before obtaining a background report
- Obtain written authorization from the applicant or employee
- Provide the applicant with a copy of the report and a summary of rights before taking adverse action
- Allow applicants an opportunity to review and dispute inaccurate information
Failure to comply with FCRA requirements can expose employers to statutory penalties, attorneys’ fees, and other liability.
Consumer Credit Reporting Agencies Act (CCRAA)
California’s Consumer Credit Reporting Agencies Act expands protections for individuals whose consumer credit reports are used for employment purposes.
The law generally requires employers to notify applicants before obtaining a consumer credit report, disclose the identity of the reporting agency issuing the report, and inform applicants that they may obtain a free copy of the report.
The statute also provides remedies for individuals whose rights are violated, including actual damages and attorneys’ fees in appropriate circumstances.
Investigative Consumer Reporting Agencies Act (ICRAA)
The Investigative Consumer Reporting Agencies Act governs investigative consumer reports, which may include information about an applicant’s character, reputation, personal characteristics, or mode of living.
Before requesting this type of report, employers must provide specific disclosures explaining the nature and scope of the investigation and the purpose of the report. The law also limits how old certain adverse information may be when included in investigative reports.
Because investigative reports often include interviews or character references, employers should ensure that their disclosures clearly explain the scope of the investigation.
Fair Chance Act (“Ban-the-Box”)
California’s Ban-the-Box Act applies to most employers with five or more employees and regulates when criminal history may be considered in hiring decisions.
In general, employers may not ask about or consider conviction history until after a conditional offer of employment has been made.
If an employer intends to deny employment based on criminal history, the employer must conduct an individualized assessment that considers factors such as:
- The nature and seriousness of the offense
- The amount of time that has passed
- The relationship between the offense and the duties of the job
The applicant must also receive notice and an opportunity to respond before a final decision is made.
Employment Credit Reports (Labor Code Section 1024.5)
California law significantly restricts the use of credit reports for employment purposes.
Employers may generally obtain credit reports only for certain categories of positions identified in the statute, such as specific managerial roles, certain law enforcement positions, or jobs involving access to substantial financial assets or confidential financial information.
For most positions, credit checks are not permitted during the hiring process.
Required Notice Before Conducting a Background Check
Before obtaining a third-party background report, employers must provide applicants with a clear written disclosure and obtain written authorization.
In most cases, the disclosure must:
- Be presented in a standalone document
- Inform the applicant that a background investigation will occur
- Describe the types of information being collected
- Identify the investigative or reporting agency
- Provide an option for the applicant to request a copy of the report
- Obtain the applicant’s written authorization
Employers should avoid combining the disclosure with unrelated acknowledgments, waivers, or handbook language. The safest practice is to provide a dedicated disclosure and authorization form designed specifically for background checks.
Adverse Action Requirements
If an employer decides not to hire a candidate based on information in a background report prepared by a third party, the employer must follow a specific process before making the final decision.
Pre-Adverse action notice
Employers generally must provide:
- A copy of the background check report
- A copy of the applicant’s rights under the Fair Credit Reporting Act
After providing this information and allowing time for the applicant to respond, the employer may then issue a final adverse action notice informing the applicant that the employment decision has been made.
When criminal history is involved, California’s Fair Chance Act may also require additional notice and response procedures.
Why Compliance Matters for California Employers
California employment regulations are among the most complex in the country. Employers are responsible for ensuring their hiring practices comply with federal and state requirements, including disclosure rules, authorization procedures, criminal history restrictions, and adverse-action protocols.
Failing to follow proper background-check procedures can lead to legal disputes, regulatory investigations, and reputational harm.
By reviewing hiring policies and ensuring background-check procedures are compliant, employers can reduce risk while maintaining fair and consistent hiring practices.
How California Labor Solutions can help
Navigating employment background check compliance can be complex, particularly under California law. Employers must ensure their policies and hiring procedures align with both federal and state requirements. California Labor Solutions provides compliance consulting to help employers assess their HR practices, workflows, and documentation practices for adherence to applicable laws. Our services focus on identifying potential risks and offering practical, legally grounded guidance to support compliant, fair, and defensible processes.
Disclaimer
This article does not contain legal advice. The information and opinions expressed herein are based on our interpretation of available guidance at the time of publication and may change as regulations evolve. Employers should consult their legal advisors regarding their specific circumstances.