Labor/Employment
Jun. 22, 2002
Proposed Bill Would Protect Most Information From Reference Checks
Employment Column - By Mark A. Romeo - Most California law firms understand the benefit of conducting background checks on new applicants for jobs as well as on existing employees. Firms also have been warned about the risks of not conducting such checks, especially since Sept. 11. However, firms, like other employers, may not know about a new law that imposes significant new obligations on them even when they do these checks in-house.
By Mark A. Romeo
Most California law firms understand the benefit of conducting background checks on new applicants for jobs as well as on existing employees. Firms also have been warned about the risks of not conducting such checks, especially since Sept. 11. However, firms, like other employers, may not know about a new law that imposes significant new obligations on them even when they do these checks in-house.
Most firms recognize that the laws defining the dos and don'ts regarding background checks can be found in the Consumer Credit Reporting Agencies Act, California Civil Code Section 1785.1 et seq., and in the California Investigative Consumer Reporting Agencies Act, California Civil Code Section 1786, et seq.
Unknown to many firms, however, is the fact that AB655 went into effect Jan. 1, adding Section 1786.53 to the Investigative Consumer Reporting Agencies Act. The new section imposes significant additional reporting obligations on law firms and other California employers who conduct in-house background or reference checks.
That section reads, "Any person who collects, assembles, evaluates, compiles, reports, transmits, transfers, or communicates information on a consumer's character, general reputation, personal characteristics, or mode of living [for employment purposes] in lieu of using the services of an investigative consumer reporting agency, shall provide that information to the consumer at the time of the meeting or interview with the consumer, or within seven days of the date the person obtains the information regarding the consumer, whichever is earlier."
A "consumer" is defined as any "natural individual who has made application to a person for employment purposes." Section 1786.2(b).
Violating the Investigative Consumer Reporting Agencies Act can have significant negative consequences. For example, an employer who violates it is liable to the individual who has made the application of employment for actual damages or $10,000, whichever is greater.
While it would appear that in most cases a claim for actual damages would be a difficult one to make out, the stiff $10,000 minimum is a significant pinch to any firm. Additionally, individuals successful in prosecuting any action under the act are entitled to recover their costs and reasonable attorney fees, and punitive damages are available for grossly negligent or willful violations.
Moreover, firms should realize that these individuals may, in addition to the above remedies, file an action "against an investigative consumer reporting agency, a user of an investigative consumer report, or an informant for invasion of privacy or defamation." Section 1786.52.
Likely having heard the uproar from California employers as a result of the onerous requirements and harsh effects of Section 1786.53, the California Legislature soon may provide some needed relief to legal and other employers. AB1068 will amend various provisions of both the Consumer Credit Reporting Agencies Act and the Investigative Consumer Reporting Agencies Act.
In terms of the Investigative Consumer Reporting Agencies Act, particularly Section 1786.53, the proposed changes are significant. Most important, if the bill becomes law, the requirements of Section 1786.53 will apply only to data obtained by an employer "which are matters of public record." For purposes of AB1068, public records "means records documenting an arrest, indictment, conviction, civil judicial action, tax lien, or outstanding judgment." Proposed Section 1786.53(a)(3). Therefore, the typical information obtained by a firm through conducting in-house reference checks would fall outside the scope of the Investigative Consumer Reporting Agencies Act, if the bill is passed.
In terms of obtaining public records, the proposed changes would require any firm that receives public records to "provide a copy of the related public record to the consumer within seven days after receipt of the information, regardless of whether the information is received in a written or oral form." Proposed Section 1786.53(b)(1). The firm also would be obligated to provide a box on any job application or other written form that, if checked by the applicant, permits the individual to waive his or her rights to the receiving a copy of the aforementioned public records. Proposed Section 1786.53(b)(2).
Moreover, firms that conduct investigations into an employee's or prospective employee's alleged wrongdoing or misconduct "may withhold the information until the completion of the investigation." Proposed Section 1786.53(b)(3). However, once the investigation is complete, the employer would be required to provide a copy of the public records to the individual unless he or she previously waived his or her rights to receiving it.
Finally, if a firm decides to take any adverse action against any individual based on the information in the public records, it would be required to provide the individual with a copy of the record, regardless of whether the individual waived his or her rights to receive it. Proposed Section 1786.53(b)(4).
In the context of employment, "adverse action" is defined as a "denial of employment or any decision made for an employment purpose that adversely affects any current or prospective employee." Proposed Section 1786.53(a)(1).
The bottom line is that law firms should cross their fingers that AB1068 passes. However, if it does not pass in its present form, firms must remember that, in addition to all of the other laws which potentially affect their hiring and retention decisions, they must strictly comply with Section 1786.53.
Mark A. Romeo is a labor and employment associate in the Irvine office of Brobeck, Phleger & Harrison.
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