California Implements Stricter Rules on Employer Use of Criminal History

SACRAMENTO — New regulations that significantly change how California employers can use an applicant's or employee's criminal history in hiring and other employment decisions took effect on October 1, 2023. The amended rules expand the scope and intensify the requirements of the state's Fair Chance Act (FCA), a "ban-the-box" law first enacted in 2018 that restricts when employers can inquire about a candidate's conviction record. The Fair Chance Act, which is part of California’s Fair Employment and Housing Act (FEHA), generally prohibits employers with five or more employees from asking about a conviction history until after a conditional job offer has been made. If an employer then wishes to rescind the offer based on a background check, the law requires them to first conduct an individualized assessment to weigh whether the conviction has a direct relationship to the job's responsibilities. The new regulations, finalized by the California Civil Rights Council, heighten the standards for this assessment and broaden the law's reach. For many business owners, these new regulations represent more than just another compliance headache; they require a fundamental reengineering of the hiring process. The state is clearly signaling that a subjective judgment is no longer defensible. Every decision to rescind a job offer based on criminal history must now be backed by a rigorous, documented, and job-specific analysis. Failure to do so exposes a company to significant financial risk, including damages for back pay, front pay, and even court-ordered hiring or reinstatement. We see many small and mid-sized companies struggle with these mandates, as they often lack dedicated HR compliance teams. Proactively engaging in business process reengineering to align hiring workflows with these new legal standards is now essential. We help clients build compliant, defensible hiring systems from the ground up. To understand how these changes impact your specific operations, business owners can contact C&S Finance Group LLC at csfinancegroup.com. One of the most significant changes introduced on October 1 is the expanded definition of a covered "employer." According to an analysis by law firm Epstein Becker Green, the regulations now explicitly apply to joint employers, staffing agencies, and any third-party entities that evaluate an applicant's criminal history on an employer's behalf. This means that companies using temporary staff or third-party recruiters must ensure their partners are also complying with the updated FCA requirements, as liability can be shared. The core of the new rules centers on the mandatory "individualized assessment." While this assessment was previously required, the updated regulations demand a more in-depth analysis using new evaluation factors before an employer can take adverse action. According to legal analysis from Ogletree Deakins, employers must now meticulously document their consideration of the nature and gravity of the offense, the time that has passed since the conviction, and the specific duties and responsibilities of the job in question. The burden is on the employer to prove a direct and adverse relationship between the conviction and the specific job. These updated rules build upon a legal framework that already prohibited employers from considering certain types of criminal records. Under the existing Fair Chance Act, employers cannot consider arrests that did not result in a conviction, participation in pretrial or post-trial diversion programs, or convictions that have been sealed, dismissed, expunged, or statutorily eradicated. Some local ordinances, such as San Francisco's, impose even stricter limitations, barring consideration of offenses older than seven years for most positions. The regulations also clarify that the rules apply regardless of how an employer obtains the criminal history information. Whether the details come from a formal background check conducted by a consumer reporting agency, an informal internet search, or self-disclosure by the applicant, the employer must follow the same assessment and notification procedures before making a final decision. This closes a potential loophole and ensures a consistent process for all candidates. Employers who fail to comply with the revised regulations face significant penalties. The Civil Rights Department, which enforces the law, can order remedies that include not only lost wages but also hiring, reinstatement, or promotion of the affected individual, as well as emotional distress damages and attorney's fees. With these stricter regulations now in effect, California employers must review and update their hiring policies, background check procedures, and training materials for managers and HR personnel. The changes underscore a continuing trend, particularly in California, toward reducing barriers to employment for individuals with past convictions, placing a greater compliance burden on businesses to ensure their hiring practices are fair and legally defensible.