California Imposes New Background Check Requirements On California Employers


In addition to the California Wage Theft Protection Act, which you can read about here, and thanks to AB 22, California employers will be ringing in the new year with a new California Labor Code provision, Labor Code Section 1024.5, and an amendment to California's Consumer Credit Reporting Agencies Act (CCRAA), Civil Code Section 1785.20.5. These new laws will limit private and public sector employers' discretion to use "consumer credit reports" for hiring and personnel decisions. Effective January 1, 2012, both will impose certain notice and disclosure obligations on employers.

California Labor Code Section 1024.5

Private and public sector employers (excluding certain financial institutions) will be allowed to use consumer credit reports for hiring or personnel decisions only if the individual is applying for or works (or will work) in certain types of positions, such as those with direct access to bank accounts, social security numbers, cash, credit cards, or money transfers, and law enforcement. Other positions for which consumer credit reports may be used include managerial positions and those that afford access to trade secret, confidential, or proprietary information.

There are no independent remedies for Labor Code Section 1024.5 violations. Nevertheless, it is likelythat civil penalties could be recovered under the California Private Attorneys General Act (PAGA).

Amended Civil Code Section 1785.20.5

An employer triggers the CCRAA when it orders a consumer credit report from a vendor (generally known as "consumer reporting agencies") for employment purposes.

The amended CCRAA provides that before requesting a consumer credit report for employment purposes, the employer must provide written notice to the employee or applicant identifying the specific authorized purpose under the Labor Code for which the consumer credit report will be used. For example, if an individual is applying for a position that affords access to trade secret, confidential or proprietary information, the written notice must state that use of a consumer report to determine suitability for employment in such a position is authorized under Labor Code 1024.5. Of course, this new requirement is over and above all existing requirements, such as the requirement that an employer provide advance notice and obtain written consent from an individual before obtaining and using a credit report.

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