Recent changes to the Fair Chance Act (FCA) mean there are new rules that California employers must follow when making decisions about new hires and what can be part of the background check, and employers could face yet more lawsuits under the rules.
The new regulations that were approved at the end of July and became effective on Oct. 1 include many new changes to the current FCA and applies not only to new employees but current ones seeking a different position with their employer, Leslie Wallis, a shareholder in the Ogletree Deakins Los Angeles office, told the Southern California Record.
Prior to the new regulations, Wallis noted, to establish job-relatedness and consistent with business necessity, an employer had to demonstrate that the policy or practice is appropriately tailored, taking into account at least the following factors (which are the same as the three EEOC targeted screen/Green factors): the nature and gravity of the offense or conduct; the time that has passed since the offense or conduct or completion of the sentence; an the nature of the job held or sought.
Leslie E. Wallis
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The new regulations mandate employers make evidence-based determinations in two phases prior to taking adverse action, Wallis noted, and if the employer intends to deny position, they must first conduct an individualized assessment using a reasoned, evidenced-based determination of whether the conviction history has a direct and adverse relationship with the specific duties of the job justifying denying the position.
The assessment must have specific factors in the regulations, such as whether a disability, including past drug addiction or mental impairment, contributed to the offense or conduct.
Employers should review their current practices and revise them so that they comply with the new regulations, Wallis said.
“This may include sending three instead of two letters to an applicant/employee,” Wallis said. “Including a pre-adverse action letter inviting the applicant/employee to provide information if they so choose to allow the employer to do an initial assessment using the factors that are to be considered before doing the individualized assessment, followed by a second pre-adverse letter after the ‘initial individualized assessment’ advising the employee that the company is considering taking adverse action and considering all the factors that must be considered at this stage.
“Finally, the employer may send an adverse action letter. Employers should also review the timing of their processes to make sure that they permit the applicant/employee sufficient time to respond to each letter.”
The new rules have raised questions about the lawsuit risks faced by employers.
“The penalties for violation of the Fair Chance Act include equitable relief (cease and desist orders; orders to hire, promote, or reinstate), compensatory damages including back pay and benefits, front pay and benefits and emotional distress damages, punitive damages, training costs, court costs and fees,” Wallis said. “In addition to following the regulations, employers will have to be cautious of what they do with information relating to any disability and to engage in the interactive process with an employee or applicant who discloses a disability.”
The FCA, which first took effect in California in 2018, is also known as a ‘Ban the Box” law and applies to public and private employers with five or more employees.
“In terms of risk of lawsuits, we expect to see some individual actions brought by individuals denied employment, but the failure to follow the new rules could also lead to class/collective actions for failure to comply with the regulations and/or for a failure to have compliant notices,” Wallis said.
A bill (SB 809) that preceded the rule changes states that California has more than 7 million people with conviction histories of some kind, including 2 million working age Californians with a felony record.
“The unemployment rate for formerly incarcerated people is very high and the legislature, in reviewing studies relating to the unemployment rate for formerly incarcerated people, has found that many of these individuals want to work and are either employed or actively looking for work,” Wallis said. “The legislature also found that ‘race and gender shape the economic stability of criminalized people’. To combat these issues and help provide additional employment opportunities, California has made it more difficult to deny employment for individuals who were formerly incarcerated, particularly where the convictions are not related to the positions they are seeking, or where these individuals do not pose a clear threat to other employees or the public.”
“California has gradually pushed toward greater and greater limitations on the information that can be used to deny an applicant or employee a job,” Wallis said. “The new regulations make changes that are designed to support the stated intent of the amended legislation.”