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Prepared By: Melissa C. Marsh, Los Angeles Employment Attorney
Written: March 2009

Why Employers Conduct a Background Check.

Employers today conduct a background check for two primary reasons. First is the fact that many job applicants simply provide false information on their job applications and resume. The second primary reason employers conduct a background check is to prevent a claim of “negligent hiring,” which may be brought by an injured employee, if the employer hires a new employee that s/he should have known was predisposed to commit a violent act of misconduct.

However, because an employee background check can reveal a wealth of information regarding a job applicant's qualifications, it is necessary to: (1) limit the extent of the background check to factual job related information; (2) have the job applicant sign a consent form that gives the former employer the right to release employment-related information, verifies that the applicant has been informed of the nature and extent of the reference/background check to be conducted, and may request a copy of the report; (3) provide the job applicant with a copy of the report if a pre-adverse notice is given; and (4) make sure that the information gathered is thereafter kept confidential. The results of any background check should be kept in a separate file marked confidential and should not be placed in the employee’s personnel file.

Before Performing a Background Check, Get the Job Applicant's Written Consent

California employers seeking to hire a new employee, but desiring to perform a background check should familiarize themselves with California law (California Labor Code §1024.5 and California Civil Code §1786.22) and the Fair Credit Reporting Act (FCRA), which in addition to providing rules for credit checks, also governs employment background checks for the purposes of "hiring, promotion, retention, or reassignment." Different rules apply depending on whether the employer conducts the background check itself, or hires a third party to perform the background check.

Regardless of who performs the actual background check, the potential employer must have the written authorization of the job applicant. That authorization must be provided on a separate piece of paper and must identify the precise nature and scope of the background check to be conducted (e.g. whether an investigative consumer report will be prepared which may entail contacting the applicant's former employers, associates, friends, and/or neighbors to provide information regarding the job applicant's character, general reputation, etc.).

What Can a California Employer Search in a Background Check

As stated above, the employer must provide notice to the job applicant of the nature and scope of the background check to be conducted. Below is a list of the information an employer may search. Either the employer, or a third party investigator may search the following information:

1. References From Past Employers, Colleagues, Friends, Neighbors. Employers can contact past employers, colleagues, neighbors, and friends, about the applicant's character, general reputation, personal characteristics, or mode of living. [Cal. Civil Code § 1786(B)(iii)]. When performing the background check the employer should: (1) let the former employer(s) know they have obtained the written consent of the job applicant; (2) stress that the confidential nature of the information will be maintained; and (3) reinforce that fact that the only purpose for the information is to make a fair hiring decision. Once these formalities have been dispensed with, the employer should then only ask questions related to the job applicant’s specific job skills, ability to work with others, attendance, attitude, and ability to follow instructions and receive constructive criticism. The employer should take notes as to who provided the information, the basic questions asked, and the answers provided, and the information should be kept in a separate confidential file, not the applicant's or employee's personnel file. The employer should also expect that the former employer will restrict their comments to confirming dates of employment and the position held. Under California Civil Code section 1786.53, reference checks performed in-house by the employer DO NOT have to be turned over to applicants, unless the information obtained includes public records. Public records, such as criminal convictions reviewed by the employer must be turned over to the job applicant within 7 days.

2. Education Records. Employers can verify an applicant's dates of attendance and degrees earned at educational institutions listed on a job application. School records are otherwise confidential and employers can NOT access them without your written consent.

3. Criminal Convictions. Employers are permitted to deny a job to an applicant based on prior criminal convictions, but only if the convictions are relevant to the job. Although an employer may review a job applicant's criminal history for the past 7 years, the employer must limit any inquiry into marijuana use to the prior two years. [Cal. Labor Code §432.7]. On addition, if the employer who plans to perform a criminal background check without the assistance of a third party, the employer's notice to the job applicant must contain a box that enables the job applicant to choose whether or not s/he wishes to receive a copy of any public records discovered. If the investigation results in an adverse action, there are additional requirements.

4. Credit Reports. Effective January 1, 2012, Labor Code §1024.5 prohibits most California employers from obtaining a consumer credit report on a job applicant and/or employee, except in six (6) very limited circumstances. For more information, please see Most California Employers Now Prohibited From Performing Employee Credit Checks. If the prospective employee falls within one of the six (6) categories, employers can view an applicant's credit report (not the credit score) to confirm or deny information provided by the job applicant, and to judge the applicant's level of responsibility. A California employer is prohibited from using a bankruptcy as a basis to deny employment. Doing so can lead to a lawsuit for discrimination.

5. DMV Driving and Vehicle Registration Records. Employers can obtain an employee's driving and vehicle registration records without the employee's consent, but unless driving is a part of the job duties employers should refrain from inspecting such records. DMV Records are available at the California DMV - (800) 777-0133.

6. Worker Compensation Records. Employers may review an employee's workers compensation records but ONLY AFTER the employer has offered the job applicant employment, and then ONLY IF a prior injury might interfere with the applicant’s ability to perform a specific required job duty. Although a California employer is prohibited from recinding a job offer because of information revealed in the workers compensation records, the employer may terminate the employee if the records establish that the employee lied on the job application. California employers can access an employee's worker compensation records by submitting a “Request for Public Records” with the California Workers’ Compensation Appeals Board (WCAB).

7. Medical History. Although employers do have a right to access an applicant's medical history, they are limited to inquiring about the applicant's ability to perform a specific job function. Delving too far (inquiring about medical conditions or mental or physical disabilities) can lead to a successful claim of disability discrimination, invasion of privacy, violation of HIPPA, and violation of the California Confidentiality of Medical Information Act (CCMIA) [Cal. Government Code § 12940 et seq.]. Insurance-related medical history information is available from MIB Group - (866) 692-6901.

8. Miscellaneous. Employers may also check a job applicant's:

• Checkwriting History, which is available from ChexSystems (800) 428-9623; Shared Check Authorization Network (800) 262-7771 Fax: (800) 358-4506; and TeleCheck (800) 735-3362.
• Tenant History, which is available from ChoicePoint (877) 497-0011 and Safe Rent (888) 333-2413
• Insurance Claims, which is available from the ISO (800) 888-4476. Consumers can also order a copy of their loss history report by calling (800) 627-3487.
• Military Records. Employers can obtain your name, rank, salary, assignments and awards without your consent.
• Public Records – Civil Court Cases for the past 7 years, Property Ownership Records, Sex Offender Lists, and State Licensing Records.

Although it is easy to obtain much of the above information, employers desiring to use a third party, may want to contact The National Association of Professional Background Screeners.

After a Background Check Is Performed, The Employer Must Provide the Job Applicant With Certain Information

If after the review of a credit report , the employer discovers a discrepancy between the address provided by the job applicant and the address on file with the credit reporting agency (Equifax, Experian, Transunion), the employer must take additional steps to verify that the credit report actually belongs to the job applicant and send the credit reporting agency a newly confirmed address.

If after review of the credit report, or other documents, the employer decides that s/he is predisposed not to hire the applicant because of some information revealed in the background check, the employer must provide the job applicant with: (1) a written "pre-adverse action disclosure," which must state that the employer is predisposed not to hire the employee because of "X" and unless "XC" can be corrected (2) a copy of the report obtained; (3) a statement that the applicant has the right to obtain a free credit report from the credit agency upon request within 60 days; and (4) a copy of A Summary of Your Rights Under the Fair Credit Reporting Act.

If the pre-adverse action actually results in the job applicant not being hired, the employer must then provide the job applicant with an "adverse action notice", which must include: (1) the name, address and telephone number of the company that prepared the report; (2) a statement that the employer, and not the company that prepared the report, has decided not to hire the employee; and (3) a statement that the job applicant still maintains the right to dispute the accuracy, or completeness, of the information in the report.

For More Information:

• FTC Publication: "Using Consumer Reports: What Employers Need to Know"
• FTC Publication: "Disposing of Consumer Report Information? New Rule Tells How"
• FTC Publication: "Negative Credit Can Squeeze a Job Search"
• Federal Fair Credit Reporting Act (15 USC §1681)
• California Investigative Consumer Reporting Agencies Act (California Civil Code §1786)
• California Consumer Credit Reporting Agencies Act (California Civil Code §1785)
• Federal Trade Commission (FTC):
  

  Consumer Response Center, CRC-240
  Washington, D.C. 20580
  Phone: (877) FTC-HELP (877-382-4357)
  TTY: (866) 653-4261
  

A large part of our employment law practice consists of counseling employers who seek to comply with new state and federal employment laws, providing human resource training, and providing essential contracts and employee policies to prevent employee lawsuits. To schedule a consultation about preparing an employee offer letter of employment, employee contract, or written employee policies please call 818-849-5206, or Email us.

Related Articles:

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• Letters of Recommendation and Employee References – What California Employers Need To Know
• 5 Most Common Hiring Mistakes Made By California Employers
• At Will Employment. Check Your Employee Offer Letters, Contracts and Policies
• California Requires All Businesses to Report the Hiring of New Employees and Independent Contractors

California Employment Law attorney, Melissa C. Marsh, is based in Sherman Oaks and West Hollywood, and is available to serve small and midsize businesses throughout Los Angeles County, including: West Hollywood, Miracle Mile, Beverly Hills, Century City, Santa Monica, Burbank, North Hollywood, Valley Village, Toluca Lake, Studio City, Sherman Oaks, Van Nuys, Encino, and Woodland Hills.

© 2009 Melissa C. Marsh. All Rights Reserved.

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