Executive Summary: California’s Department of Fair Employment and Housing (DFEH) recently enacted regulations that impose additional burdens on employers’ use of criminal background checks in employment decisions. The new regulations are expected to go into effect on July 1, 2017. The new regulations apply state-wide and, ultimately, will make it difficult for any employer in California to maintain no-hire policies for persons with criminal convictions.

The DFEH recently passed regulations prohibiting employers in California from using an applicant’s/employee’s criminal background history in making employment decisions. Specifically, the regulations require that, for any criminal background check policy that creates an adverse impact on a protected class (such as individuals of a particular race, national origin or gender), an employer must justify its use of a policy as job-related and consistent with business necessity.

According to the regulations, an employer must justify this policy or practice by demonstrating that its policy or practice bears “a demonstrable relationship to successful performance on the job and in the workplace and measure[s] the person’s fitness for the specific position(s), not merely to evaluate the person in the abstract,” and that the policy or practice is “appropriately tailored” to the job. The regulations provide two ways for an employer to meet these requirements: (1) conduct an individualized assessment of the applicant or employee; or (2) demonstrate that any “bright-line” disqualification policy properly distinguishes those who do and do not pose an unacceptable level of risk. Either method requires the employer to provide the impacted applicant/employee with notice and a reasonable opportunity to present evidence that the information is factually inaccurate prior to moving forward with the employment decision.

Additionally, an employer may still be found liable under the regulations if the applicant/employee can show that there is a less discriminatory alternative available to achieve the employer’s goals as effectively as the challenged policy or practice, such as a more narrowly targeted list of convictions that render the applicant/employee disqualified, or another form of inquiry that evaluates job qualification or risk as accurately without significantly increasing the cost or burden on the employer.

The regulations state that compliance with federal or state laws or regulations that mandate particular criminal history screening processes or require employees or applicants to possess specific occupational licenses constitutes a rebuttable defense to an adverse impact claim under the Act.

Bottom Line: Because of the state-wide scope of the new regulations, it is highly recommended that any California employer who maintains a no-hire policy for persons with criminal convictions have their policies evaluated for compliance. Employers should also be mindful that the California state legislature is currently considering legislation that would also, in some form, restrict the use of prior criminal background history in employment decisions.