Getting background checks right — and avoiding stiff consequences

California has some of the most employee-protective background check laws in the country. The process is more formal than most employers realize, and the consequences of getting it wrong (litigation, penalties, damages, etc.) can be significant. Here’s what you need to know to protect yourself. 

Running a background check on a prospective employee sounds straightforward, but in California, it unfortunately isn’t.  The state layers its own requirements on top of federal law, creating a multistep process with specific timing, notice, and documentation obligations — which many employers get wrong.  If you’re hiring in the state of California, understanding the ins and outs of the process is essential . Because the consequences can be expensive. 

The legal framework: three laws, not one 

If you’re conducting background checks, you must navigate three overlapping legal frameworks: 

The Fair Credit Reporting Act (FCRA) is the federal baseline, governing how background checks are obtained, what disclosures must be made, and what steps must be taken before adverse action proceeds based on a report.  

The California Investigative Consumer Reporting Agencies Act (ICRAA) takes this further. It applies a broad definition of what constitutes an investigative consumer report, imposes additional disclosure and authorization requirements on employers, and gives applicants greater rights than federal law alone provides. 

The California Fair Chance Act (Government Code §12952), also known as the statewide “ban the box” law, governs when an employer can even begin asking about criminal history. It applies to employers with five or more employees. 

Together, these laws create a process that must be followed in a specific sequence. Skipping steps or doing them out of order creates legal exposure regardless of whether the underlying hiring decision was reasonable.  

Step one: Make the job offer first 

Here is where most mistakes happen. Under the Fair Chance Act, you cannot ask an applicant about criminal convictions before making a conditional offer of employment. You evaluate the candidate, you make the offer, and then (and only then) do you conduct the background check. The conditional nature of the offer must be disclosed to the applicant upfront.  

This is a significant departure from how hiring in other states works, and it catches many employers off guard. Asking about criminal history on an application, in an interview, or at any point before a conditional offer, is considered a violation, even if the intent was simply to screen out candidates with certain types of convictions.  

Step two: disclosure and written authorization 

Before you run a background check, you must provide the applicant with a clear written disclosure that a background check will be conducted and obtain their written authorization. Under both the FCRA and the ICRAA, this disclosure must be a standalone document. It can’t be buried in an employment application or onboarding paperwork.  

As noted earlier, California’s requirements under the ICRAA are broader than the federal standard. If the report includes information about the applicant’s character, general reputation, personal characteristics, or mode of living (most employment background checks do), the ICRAA’s disclosure and authorization requirements apply. 

Step three: the pre-adverse action process 

This is where you might make your most consequential mistake. If the background check reveals something that causes you to rescind the offer or take other adverse action, you can’t simply make that decision and walk away. California law and the FCRA require a formal pre-adverse action process before any final decision is made. Employers should understand that FCRA adverse-action requirements and California Fair Chance Act notice obligations overlap but are not identical, and both may need to be satisfied. 

What does that look like? 

Send a pre-adverse action notice. Before taking any adverse action, you must send the applicant a written notice stating that information in the background report may result in an adverse employment decision. This notice must include a complete copy of the background report and a copy of the applicant’s rights under the FCRA. 

Allow time to respond. The applicant must be given at least five business days to review the report and respond. This is their opportunity to dispute inaccuracies, provide context, or submit additional information. You must genuinely consider any response received before you make your final decision. 

Conduct an individualized assessment. Under California’s Fair Chance Act, if the background check reveals a criminal conviction, the employer must conduct an individualized assessment that considers the nature and gravity of the offense, the time elapsed since the conviction, and the nature of the job. Employers generally may not rely on blanket exclusions and must assess whether the conviction has a direct and adverse relationship to the specific position. 

Make a final determination. After you’ve thoroughly completed this process, you can make your final adverse employment decision. 

Step four: the adverse action notice 

If you decide to rescind the offer or otherwise take adverse action after completing the pre-adverse action process, a final adverse action notice must be sent to the applicant. This must inform the applicant that the adverse action was taken based on information in the background report, provide contact information for the background check vendor, and advise the applicant of their right to dispute the accuracy of the report directly with the vendor.  

What if you get it wrong? 

The consequences of non-compliance can be costly. Under the FCRA, if you fail to follow the required procedures, you can face statutory damages of $100 to $1,000 per violation, actual damages, attorneys’ fees, and even class action exposure where systemic violations impact multiple candidates. FCRA class action litigation over background check violations has resulted in multimillion-dollar settlements, and California plaintiffs’ attorneys actively pursue these cases.  

The state’s Fair Chance Act adds its own layer of liability, including civil penalties and damages for violations of the ban-the-box requirement and the individualized assessment obligation. The California Civil Rights Department will investigate complaints in this area. 

What about the seven-year lookback rule? 

California generally limits the reporting of certain criminal records older than seven years, subject to statutory exceptions and evolving legal requirements. Employers should verify applicable reporting limits with counsel or their background screening provider. California imposes significant restrictions on the reporting of older criminal history information, but the precise scope depends on the type of record and applicable statutory exceptions. 

What should you do now? 

Audit your hiring process. If your application asks about criminal history before a conditional offer is made, that needs to change immediately. Review your entire hiring workflow against California’s required sequence.  

Review your disclosure and authorization documents. Standalone, compliant, disclosure forms are required under both the FCRA and the ICRAA. If your disclosure is embedded in other paperwork, it needs to be separated and revised.  

Build a compliant pre-adverse action process. This means pre-adverse action notice templates, a defined waiting period, a process for receiving and considering applicant responses, and documented individualized assessments for any conviction-related decisions.  

Train your HR and hiring teams. The people making hiring decisions need to understand the sequence, the timing, and the documentation requirements. A well-intentioned but uninformed hiring manager can create significant liability. 

Work with legal counsel before making adverse decisions based on background checks. Given the complexity of the interplay between the FCRA, the ICRAA, and the Fair Chance Act, having experienced employment counsel involved in your background check process (particularly if adverse action is being considered) is the most effective way to minimize your risk. 

Move forward with confidence 

California’s background check process is more formal, more sequential, and more employee-protective than you might expect. The steps exist in a specific order for a reason, and skipping or shortcutting any of them creates exposure that a reasonable hiring decision won’t protect you from.  

Do you have any questions about your current background check process or need help navigating an adverse action situation? Our employment law team is here to help. Give us a call today.