Blindfolding Employers: New Laws in California Further Restrict Job Applicant Information

The state of California has long led the nation in regulating the employment relationship. From continuously expanding the classes of employees protected under its anti-discrimination laws, to passing one of the nation’s most comprehensive equal pay statutes, to establishing and enforcing penalties for failing to comply with wage and hour requirements, California has demonstrated a longstanding commitment to advancing the rights and interests of employees by heavily regulating employers. Most recently, California’s legislature has focused on attempting to increase employment opportunities by restricting the information that employers can obtain and consider in making hiring and salary decisions. In 2017, the California legislature passed two new laws restricting employers from inquiring about job applicants’ criminal conviction histories or prior salaries in an effort to reduce disparities in its workforce and equalize employment opportunities across demographic groups. Other states have already undertaken similar efforts as well, with even more states expected to follow suit as these laws take effect. This article will highlight California employment laws relating to job applicants, discuss nationwide employment law trends in this area, and define best hiring practices for companies with employees in California.

California Has Increasingly Restricted Employers From Inquiring into Applicants’ Criminal Backgrounds

Collecting and relying on information about an applicant’s criminal history in making hiring decisions has long been a subject of scrutiny due to concerns about the disparate impact of this practice on certain groups. As of 2016, more than 70 million Americans had some kind of criminal record, with 600,000 Americans released from state and federal prisons each year.[1] Roughly seven million Californians, or nearly one in three adults, have an arrest or conviction record.[2] In order to improve the employment prospects for individuals with criminal records, policymakers nationwide have proposed “ban[ning] the box,” or preventing employers from asking about an applicant’s criminal history until after the employer has already assessed the applicant’s credentials and determined whether the applicant meets the criteria for the job.

Stakeholders disagree about the utility of “ban the box” initiatives. Proponents of such legislation contend that “[e]arly inquiries into an applicant’s criminal history may discourage motivated, well-qualified individuals who have served their time from applying” for jobs and result in the disqualification of otherwise qualified candidates, regardless of whether the employer has a legitimate business justification for considering an applicant’s criminal history.[3] To the contrary, detractors argue that limiting employers’ access to applicants’ criminal records could cause employers to use other information – such as race or gender – to “guess” which applicants might have a criminal record and then reject them, leading to further discrimination against groups which the laws were intended to help.[4]

Over the years, California has passed a series of “ban the box” measures restricting employers’ ability to rely on criminal history information in making employment decisions. In 2013, California banned state and local government agencies from asking applicants to disclose criminal history information until after determining that the applicant meets the minimum employment qualifications for the position. In passing the law, the legislature declared that “reducing barriers to employment for people who have previously offended, and decreasing unemployment in communities with concentrated numbers of people who have previously offended, are matters of statewide concern.”[5]  In 2014 and 2016, San Francisco and Los Angeles passed “ban the box” ordinances prohibiting public and private employers within those cities from inquiring about applicants’ criminal records until specified points in the hiring process.[6] 

In March 2017, the California Office of Administrative Law approved several amendments to California’s Fair Employment and Housing Act (FEHA) further restricting the use of criminal history in employment decisions. Under these amendments, public and private employers relying on criminal history for employment decisions where such a practice would create an adverse impact on specified groups must show that the practice is “job-related and consistent with business necessity.”[7] This requires a showing that the practice would bear a “demonstrable relationship to successful performance on the job and in the workplace and measure the person’s fitness for the specific job” taking into account the nature and gravity of the offense or conduct, time passed since the offense, conduct, or completion of the sentence, and the nature of the job held or sought.[8] In addition, the 2017 amendments created a requirement that employers assessing applicants’ criminal histories provide notice to any individual excluded through the screening and a reasonable opportunity for a response and consider additional information provided by the applicant to rebut the information in the applicant’s record.[9]

Later that year, in October 2017, the California legislature passed a bill further expanding prohibitions on asking applicants to disclose their conviction histories to include any employer (public or private) with five or more employees.[10] Now, such employers may not inquire into or consider an applicant’s criminal history until after that applicant has received a conditional job offer. Further, employers are fully restricted from considering, distributing, or disseminating information related to prior arrests that did not result in convictions, referrals to pretrial or post-trial diversion programs, or convictions that have been sealed, dismissed, expunged, or eradicated pursuant to law.[11]

The new law also established parameters for employers who intend to rely upon applicants’ criminal records in making employment decisions. Any employer who intends to deny an applicant a position of employment solely or in part due to that applicant’s conviction history is required to make an individualized assessment of whether the applicant’s conviction history has a “direct and adverse relationship with the specific duties of the job,” considering the nature and gravity of the offense, time passed since the offense or conduct and completion of the sentence, and nature of the job held or sought.[12] If an employer makes a preliminary decision that the applicant’s conviction history disqualifies the applicant from employment, the employer must notify the applicant of the preliminary decision in writing.[13] The applicant must be given at least five business days to respond to the notice and be allowed to provide evidence challenging the accuracy of the conviction history report before the decision becomes final.[14]

Many Other States and Jurisdictions Have Taken Steps to “Ban the Box”

The “ban the box” movement has gained national attention and momentum, with a number of other states and localities enacting similar measures to restrict employers from obtaining and considering applicants’ criminal histories. To date, over 150 cities and counties have adopted “ban the box” policies requiring that employers consider a job candidate’s qualifications before analyzing that applicant’s criminal history.[15] Thirty states have adopted laws or policies restricting public employers’ use of criminal history in employment decisions.[16] In addition to California, this includes Arizona, Colorado, Connecticut, Delaware, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Vermont, Virginia, and Wisconsin.[17] In 2016, the federal Office of Personnel Management issued a regulation preventing the federal government from asking job applicants about their criminal records until after a job has been offered.[18]

In addition to the jurisdictions with “ban the box” policies applicable to public employers, ten states have required that private employers remove conviction history questions from job applications: California, Connecticut, Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, and Vermont.[19] In 2017, New Mexico came close to passing statewide “ban the box” legislation applicable to private employers, and Washington is currently considering such legislation.[20] It is likely that additional states will pass such legislation in the near future.

Further, in 2012 the U.S. Equal Opportunity Employment Opportunity Commission (EEOC) issued guidance on the use of arrest and conviction records in employment decisions, stating that in some instances, the use of criminal history in making employment decisions may violate Title VII of the Civil Rights Act of 1964 because of the potential for disparate impact on protected classes.[21] The EEOC recommended that employers eliminate policies or practices which exclude people from employment based on criminal background, develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct, and limit inquiries into criminal records consistent with business necessity.[22] Thus, even in states whose legislatures have not specifically outlawed the use of criminal history, employers should carefully consider whether the practice of relying on applicants’ criminal records in making employment decisions could violate federal or state anti-discrimination law under a disparate impact theory.

In 2015, President Obama announced the “Fair Chance Pledge,” a White House initiative asking employers to voluntarily commit to banning the box, providing opportunities to individuals with criminal records, and training staff on making fair decisions regarding applicants with criminal records.[23] A number of national employers signed on to the pledge, including American Airlines, CVS Health, Coca-Cola, Facebook, Gap, Google, Kellogg Company, Kroger, LinkedIn, Lyft, Microsoft, Monsanto, Pepsico, Starbucks, Target, Uber, and Walmart.[24]

In 2017, California Banned Employers From Soliciting Applicants’ Prior Salaries

Another recent area of interest for California legislators has been how to reduce the wage gap between female and male workers.  In 2016, female employees working full time made, on average, 80.5 cents for every dollar earned by men, signifying a gender wage gap of 19.5%.[25]  To address this issue, policymakers have considered prohibiting employers from asking applicants about their prior pay during salary negotiations. Proponents of such a measure argue that requiring applicants to disclose their current or past salaries puts women at a disadvantage by perpetuating preexisting salary inequalities and causing women to continue earning less than their male counterparts.[26] Those who oppose salary history bans have argued that they infringe on an employer’s ability to gain important information during the hiring process, are vague and difficult to comply with, fail to account for the complexities surrounding wage negotiations, will burden employers with unwarranted litigation, and are not supported by evidence suggesting that they will alleviate inequality.[27]

In 2016, the California legislature passed a bill precluding employers from asking for applicants’ prior salaries but Governor Jerry Brown vetoed the bill, expressing concern that it would prevent employers from “obtaining relevant information with little evidence that this would assure more equitable wages.”[28] In June 2017, San Francisco passed an ordinance prohibiting all employers from considering an applicant’s current or past salary in determining whether to hire an applicant or what salary to offer the applicant.[29] Later in 2017, the California legislature again passed a bill restricting employers from obtaining and relying on salary history information in making employment decisions. This time Governor Brown signed the bill into law.[30]

The new California law, which applies to all employers in the state, prohibits employers from “rely[ing] on the salary history information of an applicant for employment in determining whether to offer employment to an applicant or what salary to offer an applicant.”[31] It also prohibits employers from orally, in writing, personally, or through an agent seeking salary history information, including compensation and benefits, about an applicant for employment.[32] The law also creates a new requirement that employers, upon reasonable request, provide to job applicants the pay scale for a position.[33]

Notably, the law does not prohibit an applicant from voluntarily and without prompting disclosing salary history information to a prospective employer, and does not prohibit an employer from considering or relying on that voluntarily disclosed information in setting that applicant’s salary.[34] It also does not prohibit employers from considering salary information that is publicly available.[35] However, the law is clear that an applicant’s prior salary, by itself, is not sufficient to justify any disparity in compensation.[36]

State and Local Governments are Increasingly Passing Laws Prohibiting Employers from Considering Salary History

The potential utility of legislation banning employers from obtaining applicants’ salary history is currently being considered and debated across the United States. In addition to California, several other states recently enacted laws restricting employers from inquiring into or relying upon an applicant’s salary history in making employment decisions, including Delaware, Massachusetts, and Oregon.[37] The local governments in New York City, Philadelphia, and Albany County, New York[38] have enacted ordinances prohibiting employer inquiries into salary history. Other jurisdictions, including Rhode Island, Florida, and Mississippi, are considering similar legislation.[39] Even in jurisdictions where employers are allowed to request an applicant’s salary history, employers should exercise caution in using that information; since 2000, the EEOC has instructed that reliance on prior salary alone cannot justify a compensation disparity.[40]

Because laws banning employers from obtaining applicants’ salary histories are so recent, their impact will not be known for some time. But a recent survey of 108 companies suggests that many employers do not think a prohibition on considering salary history will significantly improve pay disparities; two-thirds of the companies surveyed said they thought the measures would not, or would only to a small extent, improve pay differentials.[41] Despite this, some companies have publicly announced that they will no longer consider salary history in making employment decisions, including Wells Fargo, Amazon, Bank of America, Google, Facebook, Cisco, and American Express.[42] Given that these laws are increasingly being considered and enacted, other employers may want to consider examining their hiring practices and policies to prepare.

Relying on Criminal Records or Salary History in Employment Decisions Will Lead to Significant Litigation Risk

In recent years, employers have seen an uptick in litigation challenging hiring practices, including costly class action cases. After the EEOC issued its 2012 guidance concerning the consideration of arrest and conviction records in employment decisions, it filed a number of new charges and initiated investigations relating to employers’ use of criminal background checks. For example, in 2013, the EEOC filed a case against a BMW manufacturing facility in South Carolina, alleging that it violated Title VII by using a criminal background policy that allegedly disproportionately screened out African Americans and rejected job applicants without considering whether the conviction was job-related and consistent with business necessity. After two years of litigation, a federal district court judge approved a Consent Decree, reflecting a settlement requiring BMW to (1) discontinue the criminal record screening policy at issue in the litigation, (2) utilize an updated criminal record screening policy modeled after the EEOC’s recommended best practices, (3) pay $1.6 million to 56 claimants, in addition to other applicants that had not been identified, (4) offer those 56 claimants (plus others) employment through a logistics labor contractor, and (5) train its hiring personnel on the proper use of criminal background checks.[43] The EEOC also recently settled similar litigation against Pepsi ($3.13 million) and Schenker, Inc. ($750,000).[44]  Thus, employers who rely upon applicants’ criminal histories in making employment decisions should exercise caution, or else they may see themselves facing costly litigation.

The laws prohibiting employers from inquiring into applicants’ salary histories are relatively new and have not yet formed the basis for significant litigation. But employers should expect to see this practice challenged in the courts over the next few years as more and more states pass salary history legislation.

Best Practices for California Employers

Employers with employees in California should account for California’s stringent employment laws when developing their hiring processes and policies. Below is a list of best practices related to job applicants for organizations hiring employees in California:

1.     Ensure that job applications and online postings do not seek information about criminal history or salary history.

2.     Establish a salary range or fixed salary for every position and ensure that salary negotiations take place within those parameters. Be prepared to provide a pay scale to job applicants upon request.

3.     Train interviewers to avoid questions about salary history or criminal background.

4.     Carefully consider whether, and to what extent, the consideration of an applicant’s conviction history is consistent with business necessity.

5.     Establish a consistent and neutral individualized assessment policy for the consideration of applicants’ criminal backgrounds which complies with FEHA regulations and considers the factors articulated in Cal. Gov. Code § 12952(c).

6.     Develop a process which allows applicants to challenge adverse employment decisions based on criminal background in compliance with FEHA regulations and the provisions of Cal. Gov. Code § 12952(c).