January 1, 2012 New California Rules Regarding Employee Background Checks

Many of MBV Law’s clients perform background checks on potential employees through the use of outside services that check on historical information, such as prior criminal convictions. The information reported back is a “consumer credit report” within the meaning of both federal and California laws that govern how the potential employer may obtain and use such reports. A number of our clients are also required by their customers to perform such background checks on client employees who are assigned to perform services for the customer. Up until now, employers were free to select the positions on which they would perform such checks. Effective the first of 2012, however, California employers may not obtain a consumer credit report on a potential employee unless the person is being considered for one of 8 enumerated position types. Those are

1) a managerial position,

2) a position in the state Department of Justice,

3) a position as a sworn peace officer or other law enforcement position,

4) a position for which the information contained in the report is required by law to be disclosed or obtained,

5) a position that involves regular access to all of the following personal information of an individual:

a) bank or credit card information,

b) social security number, and

c) date of birth

6) a position for which the person would be:

a) a named signatory on the employer’s bank or credit card account,

b) authorized to transfer money on the employer’s behalf, or

c) authorized to enter into financial contracts on the employer’s behalf

7) a position that involves access to trade secret information

8) a position that involves regular access to cash of the employer, clients or customers totaling $10,000 or more.

In order to be considered a “managerial” position, the position must meet the criteria to be exempt as an executive under California’s wage and hour rules, which requires that the position supervise two or more employee. The trade secret exception will apply only if the information meet the definition of a trade secret under California’s Uniform Trade Secret Act.

The notice to the potential employee informing him/her that a consumer credit report may be obtained must now include the specific exception above that applies to the potential employee.

For further information about the new law please contact Eli W. Gould at eli@mbvlaw.com. Eli Gould is an employment attorney who provides a full range of legal services on employment and labor issues confronting employers and managers. Examples of the services Eli provides include advice and counsel on all aspects of the employment relationship, preventative training on legal pitfalls confronting employers, advice and drafting expertise on equity and other employee compensation plans, advice on wage and hour and employee classification issues, counsel on reductions-in-force, assistance on employment issues related to mergers and acquisitions, and other corporate transactions, representation in union-management negotiations and relationships, and representation in all aspects of employment-related litigation.