On February 17, San Francisco Mayor Edwin Lee signed the Fair Chance Ordinance (Ordinance), restricting the use of criminal background checks in hiring. The Ordinance requires employers with 20 or more employees in San Francisco to limit the use of criminal history information. The Ordinance takes effect 30 days after its signing and becomes operative in 180 days.

Under the Ordinance, employers are prohibited from inquiring about criminal history or conducting a criminal background check prematurely. Inquiry into an applicant’s criminal history is permissible only after the first live interview, or at the employer’s discretion after a conditional offer of employment. After either of those points, employers may consider an applicant’s criminal history in the hiring process. However, to be considered, the conviction or unresolved arrest must directly relate to the position. A conviction or unresolved arrest is “directly-related” if the underlying conduct has a direct and specific negative bearing on the person’s ability to perform the duties of the job in question. Before taking an adverse action based on criminal history, employers must also provide applicants with an opportunity to offer evidence on the accuracy of their convictions, and evidence of rehabilitation and other mitigating factors.

Employers are barred at any time from considering certain aspects of an applicant’s criminal history, including: participation in or completion of a diversion  or deferral of judgment program; arrests that did not lead to conviction; convictions more than seven years old; and convictions that have been judicially dismissed, expunged, or were made in the juvenile justice system.

First violations, during the initial year the Ordinance is in effect, will result in warnings and notices to correct. Second violations will result in a $50 administrative penalty for each employee or applicant. The penalty may increase to no more than $100 per employee or applicant for subsequent violations. The Ordinance does not include a private right of action, but the San Francisco Office of Labor Standards Enforcement (OSLE) may refer violators to the city attorney for civil action. Remedies may include injunction, reinstatement, back pay, payment of benefits or salary unlawfully withheld, and additional liquidated damages of $50 per employee whose rights were violated.

Employers should ensure compliance with the new Ordinance by reviewing and, if necessary, revising job applications and hiring procedures, retaining records related to the hiring process for a minimum of three years, and posting the required OSLE notice when it becomes available.

San Francisco joins more than 50 cities and counties limiting the use of criminal background checks. Ten states have legislation on background checks, with four states extending it to private employers. There are similar bills currently pending in five states. The use of criminal background checks will likely be a significant issue for employers in 2014.

Click here for the full text of the ordinance.