When you’re interviewing job applicants, you want to be able to ensure that what a prospective employee is telling you about themselves is accurate. Some sources estimate that as many as half of all resumes and job applications contain false or inaccurate information. And under-performing employees who slip through the best of hiring practices cannot only cost an employer money and resources in having to hire and train a new employee, they can pose a significant legal liability to the employer.

Because employers can be legally liable for the acts of their employees, it can be a wise investment to attempt to verify information provided by an applicant before hiring them.  One of the best defenses against a negligent hiring lawsuit is the defense an employer uses before a lawsuit is ever filed: conducting thorough background checks into job applicants.

In California, employers have to follow strict guidelines when it comes to background checks.  There are both state and federal laws that restrict the type and breadth of checks an employer can run, and employers must ensure that they comply with both. The Fair Credit Reporting Act (FCRA) sets the national standard for employment background checks when the employer uses a third party to conduct a background investigation of a job applicant.  Beyond FCRA, California laws have added additional, unique regulations that employers must further be mindful of in checking the background of job applicants. One of these state laws, the Investigative Consumer Reporting Agencies Act, also imposes duties on employers who conduct their own background checks rather than hire a third party to provide the employer with background check information.

There are a number of possibilities for the type of information about a job applicant that can be accessed in a background check.  Each type has its own regulations that must be complied with. Employers will often want to verify an applicant’s employment and education. Many employers want to also run a criminal background check. And more employers are beginning to run credit checks on applicants.

As a general rule, employers may run a criminal background check on job applicants, but prior to doing so, they must often obtain the written consent of the employee.  This is a federal law requirement for instances where information is sought from a third party like a private investigator or agency. Regardless of who runs the background check for the employer, under California law the type of criminal information able to be sought is circumscribed. For instance, in seeking criminal background information, employers may only consider the last seven years of a job applicant’s criminal information. Employers are also not allowed to ask an applicant about a marijuana conviction that is more than two-years old.

In looking at a job applicant’s criminal background, employers also cannot ask about or seek records for any arrest that did not lead to criminal conviction.  And employers cannot ask about criminal convictions for which the applicant nonetheless did not receive a criminal sentence.  Likewise, information regarding the completion of pre-trial and post-trial jail diversion programs is off limits, as are criminal records about convictions that have been sealed, expunged, or dismissed.  Surprisingly, information about a job applicant’srecent arrests that have not yet been disposed of (i.e., potential criminal charges have been or may be filed), can, however, be permissibly inquired about as part of a background check.   Notwithstanding this, the ambit of available criminal background information about a job applicant available to a California employer is thus specific and somewhat narrow.

In California, like most states, when an employee files a workers’ compensation claim, the case becomes public record and an employer will be able to seek that record.  But an employer may not use any medical information found in the record or the fact that the applicant filed a workers’ compensation claim as a basis for any decision to not hire an applicant.  The only time this type of medical information is lawfully considered by a potential employer is in determining whether an injury or medical condition could interfere with an applicant’s ability to perform a required job duty.  And even when such information is permissibly considered in that context, the prospective employer is obligated to consider whether an accommodation by the employer of the learned-of medical condition could overcome any barrier to performance of the essential job functions for the position.  Thus, seeking and using medical information about a job applicant obtained from a workers’ compensation claim file is fraught with potential traps and must be navigated by the employer carefully.

Contrary to conventional wisdom,  employers in California generally cannot run credit reports on job applicants.  There are some exceptions to this prohibition for certain high-level or sensitive job positions, however.  The positions for which a credit check can be run on an applicant include managerial positions, law enforcement positions, positions that involve access to certain personal or confidential information, positions in which the employee will be a named signatory on the employer’s bank account or credit card, and positions where the employee will have regular access to more than $10,000 in cash.

If the position falls into one of these permissible categories, and the employer wants to run a credit check, the employer must first inform the applicant that it will be requesting a credit check, and provide an explanation of why the job functions of the open position allow for a credit check to be conducted under the law (e.g., the job entails access to confidential consumer information).

Even if the job duties for an open position allow for a credit check of applicants, what an employer then can do with the credit check information is also subject to restrictions.  For example, employers cannot discriminate against an applicant because the employer learns from a credit check that the applicant previously filed for bankruptcy.  Employers are, in fact, limited to looking at only the past 10 years of bankruptcy records as part of a background check.

When conducting a background check, California requires that employers give more extensive notice to applicants than is required under federal law, and California has unique rules that an employer must follow in obtaining the consent of the applicant to conduct checks in certain circumstances. There are some records that an employer must get the consent of the applicant before reviewing and using in making a hiring decision. These include confidential records such as education, military service, and medical records.

If requesting a background check, employers must also provide job applicants with a copies of the “Summary of Your Rights Under the FCRA,” and the “Notice Regarding Background Investigation Pursuant to California Law.”  If using a third-party screening or reporting agency to conduct background checks, the employer must first get the applicant’s authorization in writing.  Before requesting a report from a screening agency, an employer must, in a document that is separate from the rest of the application, give notice that the employer may obtain an investigative consumer report of the applicant for employment purposes, and that this report may include information on the applicant’s “character, general reputation, personal characteristics, and mode of living.” The employer must also state the nature and scope of the report it will be requesting, and  provide the applicant with the reporting agency’s website address or telephone number.

The notice and consent requirements are not as strict for employers conducting their own background investigations.  For checks conducted by the employer itself, the required notices do not have to be separately given, and the employer may give the notices in the body of job applications or other documents.  But even when the employer conducts the background check itself, the employer must give the applicant an opportunity to request a free copy of any public documents obtained by the employer during the background check.

In California, the employer must, on the consent form, give the applicant the option of getting  a copy of the credit report and provide notice of the applicant’s right to view any files the reporting or screening agency maintains on the applicant. If an applicant requests a copy of the report, either the employer or the credit reporting agency should send it to the applicant no later than three days after the employer received the report.

Finally, before an employer takes an adverse action on a job application — such as not extending an offer of employment — based on information garnered from a background check, the employer must give the applicant a “pre-adverse action notice” and a copy of the background check report relied upon in taking the adverse action.

The myriad of restrictions and exceptions described above are merely a broad overview of the many rules that apply to an employer’s use of background information about a job applicant. There are nuances and additional regulations depending on a number of variables, such as the type of employer and purposes for which the information is collected.  Most important for employers to understand, there are substantial penalties for obtaining information in violation of the law or for using lawfully-obtained information for an improper purpose.  These penalties can include federal and state agency enforcement actions against the employer, and private lawsuits on behalf of the aggrieved job applicant.  Therefore, employers may benefit from the advice of an employment law attorney experienced with the employer’s specific needs.