At-a-Glance Compliance Overview

State Mini-FCRA Laws

California has two statutes that supplement the federal Fair Credit Reporting Act and regulate consumer reporting agencies providing employment background reports.

Consumer Credit Reporting Agencies Act (CCRAA)

Cal. Civ. Code §1785.1 et seq.

The CCRAA regulates consumer credit reports used for employment and other purposes. It establishes requirements related to permissible purpose, disclosure, dispute procedures, and consumer rights.

Investigative Consumer Reporting Agencies Act (ICRAA)

Cal. Civ. Code §1786 et seq.

The ICRAA governs investigative consumer reports, which are commonly used for employment background checks involving criminal records, employment verification, or personal interviews.

Employers must:

• provide a stand-alone written disclosure before obtaining a report
• obtain written authorization from the applicant
• provide additional disclosures if an investigative consumer report includes information obtained through personal interviews.

These requirements supplement the federal FCRA disclosure and authorization rules.

Criminal Record Reporting Rules

California imposes restrictions on how criminal records may be reported in employment background checks.

Conviction Reporting Limits

Under the Investigative Consumer Reporting Agencies Act (Cal. Civ. Code §1786.18(a)(7)), investigative consumer reporting agencies generally may not report criminal records when the date of disposition, release, or parole occurred more than seven years before the report.

However, this limitation does not apply if the position has an annual salary of $125,000 or more. For those positions, convictions may be reported beyond the seven-year period.

These restrictions apply to consumer reporting agencies. Employers must still comply with separate rules governing criminal history inquiries.

Non-Conviction Records

California law significantly restricts employer use of non-conviction records.

Cal. Labor Code §432.7 prohibits employers from asking about or considering:

• arrests that did not lead to conviction
• participation in diversion programs
• dismissed charges.

Exceptions exist for certain positions, including law enforcement roles and situations where an employer is required by law to conduct a criminal background check.

Marijuana Convictions

Cal. Labor Code §432.8 prohibits employers from asking about or considering marijuana convictions that are more than two years old.

Fair Chance / Ban-the-Box Law

California’s statewide fair chance hiring law is known as the California Fair Chance Act.

Cal. Gov. Code §12952

Employer Coverage

The law applies to employers with five or more employees.

Timing of Criminal History Inquiry

Employers may not ask about or consider criminal history until after extending a conditional offer of employment.

Individualized Assessment

Before rescinding an offer based on criminal history, the employer must conduct an individualized assessment considering:

• the nature and gravity of the offense
• the time that has passed since the offense or completion of sentence
• the nature of the job sought.

Notice Requirements

If an employer intends to deny employment based on criminal history, the employer must:

1. provide written notice of the preliminary decision

2. provide a copy of the background check report

3. allow the applicant five business days to respond before making a final decision.

Credit Check Restrictions

California restricts employer use of credit reports for employment purposes.

Cal. Labor Code §1024.5

Employers may obtain a consumer credit report only for certain positions, including:

• managerial positions
• positions in the Department of Justice
• law enforcement roles
• positions with access to bank or credit card account numbers
• positions with access to confidential personal information
• positions with regular access to cash totaling $10,000 or more
• positions with authority to transfer money or enter financial agreements on behalf of the employer
• positions where credit checks are required by law
• positions within financial institutions.

Employers must disclose the statutory basis for requesting the credit report.

Cannabis Use and Drug Testing Rules

Legal Status

Recreational cannabis and medical cannabis are both legal in California.

Employment Protections

Beginning January 1, 2024, Cal. Gov. Code §12954 prohibits employers from discriminating against applicants or employees based on:

• off-duty cannabis use
• drug tests that detect non-psychoactive cannabis metabolites.

SB 700 (2023) expanded these protections by prohibiting employers from requesting information about an applicant’s prior cannabis use.

Drug Testing

Employers may still:

• prohibit impairment during work hours
• conduct scientifically valid impairment-based testing
• enforce drug testing requirements required by federal law.

Safety-sensitive positions may remain subject to stricter drug testing requirements.

Pay Equity and Salary History Rules

California regulates compensation inquiries and job posting disclosures.

Salary History Ban

Cal. Labor Code §432.3

Employers may not:

• ask applicants about salary history
• rely on salary history when determining compensation.

Pay Transparency Requirements

SB 1162

Employers with 15 or more employees must include a pay scale in job postings.

Employers must also provide pay scale information to employees upon request.

Local Fair Chance or Screening Ordinances

Several California jurisdictions impose additional fair chance hiring requirements.

Los Angeles (City)

Fair Chance Initiative for Hiring Ordinance

Applies to employers with 10 or more employees. Employers must conduct a fair chance process before denying employment based on criminal history.

San Francisco

San Francisco Fair Chance Ordinance

Applies to employers with five or more employees operating in San Francisco. The ordinance requires a conditional offer before criminal history inquiries and mandates a detailed notice process.

Los Angeles County (Unincorporated Areas)

Los Angeles County Fair Chance Ordinance

Effective September 3, 2024. Applies to employers with five or more employees operating in unincorporated areas of Los Angeles County.

San Diego County (Unincorporated Areas)

San Diego County Fair Chance Ordinance

Effective July 1, 2024. Applies to employers with five or more employees operating in unincorporated areas of San Diego County.

These local laws operate alongside the statewide Fair Chance Act.

Record Sealing / Clean Slate Laws

California has expanded access to record sealing and expungement.

Automatic Record Sealing

AB 1076 (2022) requires courts to automatically seal certain arrest records under Penal Code §851.93.

Petition-Based Expungement

Individuals may also petition for relief under Penal Code §1203.4, which allows certain convictions to be dismissed after completion of probation.

Employers generally may not consider records that have been sealed or expunged.

Key Statutes

• Consumer Credit Reporting Agencies Act — Cal. Civ. Code §1785.1 et seq.
• Investigative Consumer Reporting Agencies Act — Cal. Civ. Code §1786 et seq.
• California Fair Chance Act — Cal. Gov. Code §12952
• Arrest record restrictions — Cal. Labor Code §432.7
• Marijuana conviction restrictions — Cal. Labor Code §432.8
• Credit check restrictions — Cal. Labor Code §1024.5
• Cannabis employment protections — Cal. Gov. Code §12954
• Salary history ban — Cal. Labor Code §432.3

Employer Compliance Checklist

Employers conducting background checks in California should:

• delay criminal history inquiries until after a conditional offer
• conduct an individualized assessment before denying employment based on criminal history
• ensure consumer reporting agencies comply with the seven-year reporting rule when applicable
• avoid considering non-conviction arrest records
• confirm that any employment credit checks fall within statutory categories
• update drug testing policies to comply with cannabis employment protections
• review local fair chance ordinances where hiring occurs
• include pay scale information in job postings when required.