San Francisco has long been touted as a cutting-edge city that leads the charge for individual rights, entitlements, and freedoms. The first quarter of 2014 has been no different for the City by the Bay. On Valentine’s Day, February 14, 2014, Mayor Edwin Lee gave San Franciscans their own special valentine by passing the Fair Chance Ordinance, intended to open doors and remove barriers for housing and employment to those San Franciscans who have criminal arrests or convictions. Among other topics, this ordinance will require private (i.e., nongovernment) employers with operations in San Francisco to revisit their application forms and background check processes, add new notices to their job postings and solicitations, and comply with new applicant notice and workplace posting requirements by August 13, 2014.

By expanding this ordinance, San Francisco joins a growing number of US cities and states that have passed or are considering “ban the box” legislation.

Fair Chance Ordinance

In February, San Francisco adopted its Fair Chance Ordinance (also known as “Ban the Box” law) to prohibit private employers from inquiring about a job applicant’s criminal history until after the applicant has been selected for and participated in a live interview. The expanded ordinance also imposes new restrictions on how private employers use an applicant’s criminal history, sets penalties and provides for new posting requirements.

The Fair Chance Ordinance applies to employers who:

  1. are located or doing business in San Francisco, and
  2. employ twenty (20) or more persons, regardless of their location.

For any position where the location of work, in whole or substantial part, is within San Francisco, such covered employers are prohibited from inquiring into an applicant’s criminal history or pending charges until after the first live interview. The ordinance applies to individuals applying for internships as well.

After the first interview, employers may inquire about misdemeanor and felony convictions that occurred within the last seven years.

Under no circumstances may a covered employer inquire about any of the following:

  1. an arrest not leading to a conviction, except for those with charges still pending (California’s Labor Code has a separate, state-wide restriction for how employers may consider pending charges);
  2. participation in or completion of a diversion or a deferral of judgment program;
  3. judicially dismissed, expunged, voided, invalidated, or sealed records;
  4. juvenile convictions or any matter considered in or processed through the juvenile justice system;
  5. convictions more than seven years old; and
  6. information pertaining to an offense other than a felony or misdemeanor.

The only exception to the above prohibitions is when the inquiry is required by a government agency, federal or state law.

After obtaining an applicant’s criminal history as limited above, employers can only consider “directly-related convictions” that have “a direct and specific negative bearing on the [applicant’s] ability to perform the duties or responsibilities necessarily related to the employment position.” In determining whether a conviction is “directly related” to the employment position, the employer must consider (a) whether the position offers the opportunity for the same or similar offenses to occur, and (b) whether circumstances leading to the conduct for which the person was convicted will reoccur in the position. After a determination has been made that a conviction is directly related, an employer still must conduct an individualized assessment, considering the time that has elapsed since the conviction, any evidence of inaccuracy, rehabilitation, or other mitigating factors.

Notice & Posting Requirements

When an employer decides to reject an applicant, or other adverse employment action, based on his or her criminal history, the employer must provide two separate notices. First, prior to taking an adverse action (such as refusal of further consideration for employment, or revoking an offer for employment) and regardless of whether the information was obtained as a result of the applicant’s self disclosure, the employer must inform the employee of the prospective adverse action, the items forming the basis for the prospective adverse action, and a copy of the background check report. The employer must then wait seven days from the date of the notice before taking an adverse action. If during the seven-day waiting period the employee gives the employer notice, orally or in writing, of evidence of an inaccuracy, rehabilitation, or any other mitigating factor, the employer must delay the adverse action for a reasonable time to reconsider the potential adverse action in light of the new information. Upon taking any final adverse action based upon the applicant’s criminal history, the employer must notify the applicant of the final adverse action.

In addition to individual notices, covered employers are required to statein all job solicitations or advertisements that are reasonably likely to reach potential employees seeking employment in San Francisco that the employer will consider for employment qualified applicants with a criminal history.

San Francisco employers must now also ensure their notice and consent forms for criminal background checks comply with the requirements that will be published by San Francisco’s Office of Labor Standards Enforcement (OLSE) by August 13, 2014, in addition to complying with the already existing background notice and consent requirements under California’s ICRAA and the Federal FCRA.

Covered employers must also display a poster provided by the San Francisco OLSE in a conspicuous place at every workplace, job site, or other location in San Francisco under the employer’s control where applicants or employees visit. Employers must also send the poster to each labor union or representative with whom the employer has a collective bargaining agreement or other understanding that is applicable to employees in San Francisco. The notice must be posted in English, Spanish, Chinese, and any language spoken by at least 5 percent of the employees at the job site or other location at which it is posted. The poster will be available from the OLSE by August 13, 2014.

Record Retention

Employers must retain records related to the job solicitations and postings, application forms, and hiring process for three years and provide them to the OLSE upon request. Failure to do so results in a presumption that the employer did not comply with the ordinance absent clear and convincing evidence otherwise.

Penalties for Non-Compliance

The City may bring a civil action against employers for violating the ordinance, and may seek legal and equitable relief including, but not limited to, an injunction, reinstatement of the employee / hiring of the applicant, back pay, benefits, liquidated damages in the amount of USD 50 per employee for each day the Ordinance was violated, and reasonable attorneys’ fees and costs.

In addition to the City being able to bring a civil lawsuit, the OLSE can pursue administrative enforcement of the ordinance. For a first violation or violation during the first twelve (12) months following enactment of the ordinance (i.e., from August 13, 2014 through August 12, 2015), the OLSE is limited to issuing a warning and offering assistance with compliance. For a second violation, the OLSE can seek penalties of up to USD 50 for each policy violation. Thereafter, for subsequent violations, the penalties can increase up to USD 100 for each policy violation.

The ordinance requires compliance and prohibits retaliation against employees who report violations. While it does not create a private right of action for an applicant to sue an employer, a rejected applicant or employee might be able to sue a non-compliant employer for wrongful failure to hire or violation of public policy and seek tort-like damages, such as lost wages, emotional distress, and possibly punitive damages.

Other Unique Compliance Obligations for San Francisco Employers

The Fair Chance Ordinance has separate obligations for city contractors and vendors. The Ordinance joins several other existing employee-protective ordinances already in effect in San Francisco.

For example, San Francisco has its own hourly minimum wage that far exceeds the federal and state minimum wage. Effective January 1, 2014, the hourly minimum wage in San Francisco increased to USD 10.74 per hour.

San Francisco is one of the few cities to require private employers to provide paid sick leave, and paid employee health care benefits, to their San Francisco workers.

Additionally, as of January 1, 2014, employers with 20 or more employees in San Francisco must consider employee requests for “flexible work arrangements” to care for a child, family member with a serious health condition, or parent over the age of 65.

These ordinances also have their own posting, record keeping and anti-retaliation requirements.

Actions For San Francisco Employers

US employers with 20 or more employees located or doing business in San Francisco must take note now of the expanded Ordinance. Covered employers should take the following actions:

  • Add the required notice language in all job postings and solicitations for San Francisco-based positions;
  • Review employment applications used for San Francisco-based positions and remove questions about criminal history;
  • Ensure hiring practices delay inquiry about criminal history until after the first interview, and that only permitted convictions are considered for employment purposes;
  • Ensure hiring policies also comply with the credit check limitations already in place for all California positions;
  • Provide the proper notices, with the required delays, for adverse employment actions taken as a result of background check results; and
  • Ensure the San Francisco postings are up for minimum wage, sick leave and paid benefits, Family Friendly Ordinance, and now the Fair Chance Ordinance.