NEW CASE: California Employers Must Comply With Strictest Background Check Law

In a recent decision (Connor vs. First Student, Inc.), the California Supreme Court held that when conducting a pre-employment background check, California employers are required to comply with the stricter of the requirements set forth in the Investigative Consumer Reporting Agencies Act (ICRAA) and the Consumer Credit Reporting Agencies Act (CCRAA).

As background, the ICRAA covers background checks in which information on a consumer’s “character, general reputation, personal characteristics, or mode of living” is obtained through any means. Among other things, ICRAA requires the person procuring the report to certify that they made certain required disclosures, and that the consumer gave written authorization for the report’s procurement.  The Consumer Credit Reporting Agencies Act (CCRAA), on the other hand, covers information “bearing on a consumer’s credit worthiness, credit standing, or credit capacity,” and does not have a written authorization requirement.

In this case, a group of employees filed a class action lawsuit against their employer and claimed that the employer had violated the California background check law.  In performing its background checks, the employer used a third party and sought criminal records, sex offender registries, address history, driving records, and employment history of potential employees.  The employees claimed that although the background check notice complied with the CCRAA, the company violated the law because its background check notice did not comply with all of the requirements set forth in the ICRAA and the employer failed to obtain employees’ written authorization to conduct the background check, as ICRAA requires.

The question before the Court was whether an employer had to comply with both the ICRAA and the CCRAA when a pre-employment background check (especially one which seeks information relating both to character and creditworthiness) could potentially implicate both laws.  Under past California case law, courts have held that the overlap between these two laws renders the ICRAA unconstitutionally vague whenever the CCRAA also might apply.

However, in the present case, the Supreme Court found that employers are required to comply with the notice requirements set forth in both laws in a situation where a pre-employment background check implicates both laws.  Specifically, the Supreme Court held

In interpreting ICRAA and CCRAA, we agree with the Court of Appeal and find that potential employers can comply with both statutes without undermining the purpose of either. If an employer seeks a consumer’s credit records exclusively, then the employer need only comply with CCRAA. An employer seeking other information that is obtained by any means must comply with ICRAA. In the event that any other information revealed in an ICRAA background check contains a subject’s credit information and the two statutes thus overlap, a regulated party is expected to know and follow the requirements of both statutes, even if that requires greater formality in obtaining a consumer’s credit records (e.g., seeking a subject’s written authorization to conduct a credit check if it appears possible that the information ultimately received may be covered by ICRAA.

Take home for employers

In light of this ruling, it is recommended that California employers pay close attention to the types of information sought in pre-employment background checks regarding employees or potential employees and make sure you are following the applicable law and any specific procedural requirements.

If your pre-employment background check makes inquiries into a person’s “character, general reputation, personal characteristics, or mode of living,” then you will need to follow the notice requirements set forth in the ICRAA and obtain an employee’s written authorization.  Finally, also remember that even where a background check simply seeks credit information, you may have to comply with both the ICRAA and the CCRAA.