By Pam Devata and Dana Howells

Complying with the federal Fair Credit Reporting Act (the FCRA) is not easy. Compliance with both the FCRA and California restrictions on credit and background checks is much more challenging. Given California’s extra-strength privacy protections and penchant for workplace regulation, it is not surprising that California has peculiarities when it comes to credit and other background checks.  In Part 1 of a three part blog, we take a dive into credit checks—California style.

California is one of  a growing number of states with laws restricting use of credit history for employment. Effective January 1, 2012, California Labor Code Section 1024.5 generally prohibits the use of credit reports for employment purposes by private sector employers.  If an exception to Section 1024.5 permits an employer to use credit reports, California employers must comply with both the FCRA and the California Consumer Credit Reporting Agencies Act, which are not always congruent. 

Comparing and contrasting the FCRA with the California Consumer Credit Reporting Agencies Act

What FCRA requires—in a nutshell.  Prior to conducting a background check on an applicant or employee through a third party, an employer must:

  • Provide a notice/disclosure to the employee/applicant that the employer will seek a credit report.  The disclosure must be clear, conspicuous, and made in a document consisting solely of the disclosure.  This is a huge area of class action litigation.
  • Supply a copy of  “A Summary of Your Rights Under the Fair Credit Reporting Act.”
  • Obtain written authorization/consent from the applicant/employee. 

Prior to taking adverse employment action against an applicant/employee based, in whole or in part, on a consumer credit report (or investigative consumer report—more about those in Part 2), employers must follow a two-step notification process required by the FCRA: Continue Reading Checking Out Applicants (Part 1): California Credit Checks

By Laura Maechtlen and Kristen Verrastro

During onboarding, it would not be unusual for an employer to ask a new hire to give written authorization for deductions from their final paycheck if the employee does not return employer provided uniforms, tools, or equipment.  It also would not be unusual for employers to ask employees to supply their own equipment and tools, or clothing as a uniform when reporting for work.

In California, however, written authorization executed during the onboarding process will not suffice for reimbursement deductions at the time of termination.  Additionally in California, employers cannot require employees to supply certain clothing, tools, and equipment without reimbursement.


When it comes to uniforms, federal law differs from California law:

Federal law:  Federal law may allow employers to pass the costs of providing or maintaining uniforms to employees, as long as the employee’s pay would not drop below minimum wage in doing so.

California law:  California law requires that employers pay for or reimburse nonexempt employees for all costs associated with uniforms, regardless of the employees’ compensation.

What is a “Uniform”? Continue Reading On-Boarding Series: Uniforms and Tools and Equipment, Oh My! The Peculiarities Of California Law Regarding Reimbursement

By Laura J. Maechtlen and Chantelle C. Egan

It’s payday!  If the employer uses direct deposit, an employee can conveniently and immediately access wages without going to the bank (or waiting for the check to clear).  For that reason, it might seem that every new employee would want direct deposit.  But, employers must be careful.

California requires that employers obtain written authorization from the employee first.  Indeed, while California often bucks the trends of its sister states, when it comes to direct deposit authorization, California is just one of the crowd.  Alaska, Connecticut, Colorado, Delaware, Florida, Idaho, Illinois, Iowa, Maryland, Montana, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, Rhode Island, Vermont and Wyoming all require written permission authorizing direct deposit.

Employer Tips: 

  • Obtain Written Authorization:  If your company wants to encourage direct deposit, make sure to include a written authorization in a new employee’s welcome packet.  But, keep in mind that an employee’s decision to agree to direct deposit is a voluntary one.
  • Ensure Timely Wage Payment Pending Direct Deposit Set-Up:  Once you have received a new employee’s written authorization, you are free to set up direct deposit.  As a word of caution, direct deposit may take a few pay periods to be up and running.  In the interim, be prepared to timely distribute a check for the new employee’s wages.  Just because the authorized direct deposit is not set up, the employer is not relieved of timely distributing wages.
  • Wage Statements Must Still Be Provided:  Paying by direct deposit does not remove the obligation to provide the employees’ itemized wage statements (aka “pay stubs”) under Labor Code § 226, along with the advice of deposit.

What about final wage payments? 

Inevitably, every on-boarded new employee eventually must be off-boarded.  California’s Labor Code § 213 permits employers to pay final wages via direct deposit if an employee quits or is terminated.  While this may seem like a convenient solution for paying final wages, logistically it may prove difficult, especially if an employee’s last day does not fall on a scheduled payday.  Since there are strict time requirements associated with providing a departing employee his or her final wages, the safest bet is usually to issue a timely paper check for all earned wages, to avoid any penalties.

Workplace Solutions:  Direct deposit arrangements are often the most desirable and convenient way for both employer and employee to conduct the wage payment transaction.  Just remember you can’t do it without the employee’s written consent, and other obligations, such as to paying accurately and on time remain the same.

Up next week:  Our final post in the On-Boarding Series—Uniforms and Tools.

Edited by Julie Yap

By Chantelle Egan and Laura Maechtlen

Drug testing implicates the California right to privacy, which is enshrined in our Constitution.  Therefore, employers must be careful when drug testing is a component of their onboarding process.

The General Rule  

A private employer in California can require a job applicant to pass a pre-employment drug test as a condition of employment, regardless of the job position, as long as all applicants are subject to the same requirements.  Pre-employment testing is not grounded in any suspicion that the job applicant actually abuses drugs.  Indeed, the California Supreme Court has found just the opposite.  When done correctly, pre-employment “suspicionless” drug testing does not violate the privacy rights of a job applicant because, unlike a current employee, the potential employer has not had an opportunity to observe the candidate’s work habits for indications of substance abuse.  Moreover, by applying for a job, the applicant is voluntarily choosing to reveal personal information in conjunction with the application.

Briefly noted, drug testing of job applicants is permissible as long as the following conditions are met:

  • Notice:  Applicants receive prior notice that a drug test will be required.  The job posting materials should clearly state that passing a drug test is a condition of employment.
  • Consent:  It is a best practice to have the applicant consent in writing to the fact of testing and the procedures to be used.
  • Reasonable Process:  The collection process should minimize intrusiveness and must be administered in a reasonable and reliable fashion.
  • Protected Results:  Procedural safeguards must be in place to restrict access to the test results.  Multiple candidates’ results may not be compiled together.  Nor may a particular candidate’s results be widely distributed.

Timing of the Test

Timing of drug testing is also important.  As a general rule, a pre-employment drug test should occur (and the results reviewed) prior to the date the applicant is hired and begins working for the employer.  Doing so removes any confusion regarding whether the applicant should be afforded the greater privacy protections afforded current employees.

Drug tests of current employees generally must be supported by reasonable suspicion of drug use prior to the administration of such tests.  Random testing is permissible pursuant to a federal mandate (e.g., DOT agency regulations) or if an employee occupies a safety-sensitive position in which a mis-performed duty could have irremediable harmful consequences.

Medical Marijuana In The Golden State

But what if an applicant uses medical marijuana lawfully in the State of California?  A prescription for medical marijuana may protect a person from state criminal prosecution.  But, it does not impose an obligation on an employer to accommodate a potential employee’s use of medical marijuana, even when ingested or smoked only away from the workplace.

Workplace Solutions:  Pre-employment testing is generally permitted if the rules sketched out above are followed.  However, the devil is in the details.  If you have, or are planning to have, a pre-employment testing program, make sure your notices, consents and procedures are reviewed by an expert.  And, once an employee is hired, drug testing should be limited to situations where an employer has reasonable suspicion the employee is using or under the influence of illegal drugs or alcohol while working.  Post-accident testing may be permissible in situations where an employee has caused significant damage to company vehicles, equipment, machinery or other property or a serious injury to himself/herself or another individual.  Random testing should be limited to employees who are in safety-sensitive positions.  Finally—at least so far—it is not discriminatory in the Golden State to refuse to hire an applicant or discipline an employee because he/she tests positive for marijuana, even if the individual has a medical marijuana card.  The use and possession of marijuana remains illegal under federal law.

Edited by Julie Yap

By Laura Maechtlen and Kristen Verrastro

We’ve all been in this situation: you’re trying to get to know someone better, so you ask that person a seemingly innocent question which inadvertently elicits an answer you wish you could have avoided!  If this happens in a social setting it’s unlikely to create a big problem, but if this type of scenario occurs during a hiring interview, what was intended as a friendly or innocent question could turn into a potential liability. 

Employers in California should remember that California’s anti-discrimination statutes include more protected characteristics than federal laws and many other states. Various federal laws prohibit discrimination on the bases of race; color; religion; sex; national origin; citizenship; pregnancy, childbirth, or related medical condition; age , mental or physical disability; and genetic information.  California adds to this list:  creed; ancestry; medical condition; marital status; gender; gender identity; gender expression; and sexual orientation.  Also, California prohibits asking about arrests that did not result in conviction, except you can ask about arrests for which the person is out on bail or on their own recognizance pending trial. 

Additionally, California protects employees and job applicants based on a perception that an individual possesses any of the protected characteristics, or that an individual associates with a person or group that is protected by the anti-discrimination statutes.  As such, to avoid potential liability stemming from California’s expanded statutory protections, it is important to focus your interview questions on the job and its requirements.

Employers in California should avoid these types of seemingly innocuous questions during an interview:

  • Are you married or planning to get married?  Where does your spouse work?
  • What are your plans for a family? Do you have child support obligations?
  • Have you ever changed your name? 
  • When did you graduate from high school/college? Are you a recent graduate?
  • With whom do you live?  Do you live with your parents?
  • When did you serve in the military?  For how long?  How were you discharged?
  • Where were you/your parents born?
  • In what languages are you fluent (unless required by the particular job)? What is your first language?  How did you learn a foreign language?
  • To what clubs or societies not related to work do you belong?  Do you belong to any religious organizations? 
  • Have you ever seen a counselor or psychologist for any reason? 
  • Have you had any medical problems?
  • What is it like living with        ___ (e.g., blindness, a prosthesis, fill-in-the-blank with other visually perceivable disability)?
  • How many days of work did you miss at your last job?
  • Have you ever filed an application for Workers’ Compensation?
  • Have you ever been arrested? 
  • What is your FaceBook (or any social media account) password, or content?  Why don’t you open it up for me right now so we can take a look? 

A good general rule is this: information acquired and requested through pre-employment screening should be confined to what is necessary to determine if an individual is qualified for the position.  

Happy hiring!

Isn’t it true that nationwide employers can interview and hire employees for their California offices so long as they follow federal hiring laws?  In a nutshell, no way.  Hiring in California presents a host of nuanced, state-specific rules that often add up to “don’ts.” We list a few for you below.

Don’t Oversell

Question:  We really would like to hire this guy.  Is it okay to tell him what he wants to hear about the job?

Answer:  No, especially if he will be moving for the job.  California Labor Code § 970 prohibits employers from making knowingly false representations about the nature of the work, the length of time that the work will last, and the compensation, among other things.  Not only can an alleged misrepresentation serve as the basis for a civil lawsuit, it is also a misdemeanor punishable by a fine or imprisonment for up to 6 months, or both!

Don’t Forget to Exclude The “Puffer”

Question:  We can ask an applicant about criminal convictions, right?

Answer:  Yes, but make sure you do not ask questions about any arrests, detentions that did not result in conviction, or certain marijuana convictions that are over two years old.  If the marijuana inquiry prohibition is violated, an applicant can recover the greater of his or her actual damages or $200, plus attorneys’ fees and costs.  It is also a misdemeanor, punishable by a fine.

Don’t “Judge”

Question:  An applicant owns handguns and goes to the shooting range on weekends to practice.  These are valid reasons not hire him, right?

Answer:  No, if the conduct is lawful, and takes place off-premises and during nonworking hours.  Labor Code §§ 96(k) and 98.6 (c)(1) protect applicants from such discrimination.  If such discrimination occurs, the applicant will be entitled to employment, and reimbursement for lost wages and benefits caused by the acts of the prospective employer.

Don’t Take Solace in Your Arbitration Agreements

Question:  Our company requires new hires in all states where we do business, including those in California, to sign an arbitration agreement.  We won’t have to worry about lawsuits in California court, correct?

Answer:  Not necessarily.  The California Supreme Court held in Armendariz v. Foundation Psychcare Services that “unconscionable” arbitration agreements are unenforceable.  Unconscionability is defined very broadly and includes situations where an employee does not have a realistic opportunity to bargain about the terms of an arbitration agreement, or where the terms are harsh or one-sided.  Some thought the United States Supreme Court’s decision in AT&T Mobility LLC v. Concepcion would chip away at Armendariz in favor of enforcement of arbitration agreements, but most California courts have refused to part with the Armendariz holding. (See e.g., Compton v. Superior Court).

Don’t Forget The “Paper”

Question:  We follow federal law in the distributions to new employees at or near the time of hire.  We are good to go in California, right?

Answer:  No.  California has specific distribution requirements at or near the time of hire, including:

  • California Labor Code § 2810.5 requires private California employers to provide written notice to employees no later than their first day at work about information including, but not limited to, the rate of pay, basis of pay (e.g., hourly, salary, commission, etc.), allowances for items claimed as part of the minimum wage (e.g., tips, meals and lodging), the regular payday, employer’s name, address, and phone number, any “dba,” and information regarding the employer’s worker’s compensation insurance carrier. 
  • Employers must submit a Report of New Employee(s) (DE 34) within 20 days of any new employee’s first day of work.  Employers must also provide new employees with, among other things, a Disability Insurance Provisions pamphlet (DE 2515) within five days of hire, a Paid Family Leave Insurance pamphlet (DE 2511) no later than any new employee’s first day of work, and a California tax withholding form (DE-4), which some employees must complete upon hire. 
  • The California Department of Fair Employment and Housing requires employers to provide its Sexual Harassment pamphlet (DFEH 185) or an equivalent document to all new hires.

Workplace Solutions: Even if you have only a handful of employees in California, it is prudent to familiarize yourself with the California-specific requirements pertaining to hiring and new employees.  A review of  any employment applications, interview questions, and new hire packets or checklists are all steps to ensure California compliance.

Wouldn’t we like to know if a potential applicant has ever criticized a former employer, or whether their online presence gives evidence of illegal activity or violent, discriminatory or unethical behavior? Or just poor judgment? What if they belong to political groups, like the Tea Party or the ACLU?

What is so wrong with learning information like that? The answer is it can expose the employer to liability.

The use of social media in hiring decisions remains a hotbed of potential legal risk for employers. Yet, an increasing number of employers are using social media sites such as Facebook, LinkedIn, Twitter, YouTube and even Craigslist to screen potential candidates to avoid hiring the “wrong” candidate.

What Can An Employer Look At?  California enacted AB 1844 last year, which affords job applicants greater social media protections by prohibiting employers from seeking log-in information from applicants, asking applicants to “friend” other employees, or asking an applicant’s “friends” to disclose what the applicant has posted on social media.  However, employers are not explicitly restricted from accessing publicly available information about candidates.

  • Bandwagon effect:  Since California passed AB 1844, many other states have followed with similar legislation. On the federal front, the National Labor Relations Board (NLRB) has kept a watchful eye on employers using social media information in employment decisions.  It is worried that concerted activity protected under federal labor laws may be restricted.  On February 4, 2013, the federal government reintroduced the Social Networking Online Protection Act” (SNOPA) which would prevent employers from seeking access to social media and other online information from job seekers and current employees.

­Discrimination Traps.  Social media can reveal personal information about a candidate that would be illegal to request during the hiring process (e.g., physical disability, age, marital status, religious affiliation, political affiliations, etc.).  Employers should be mindful that this may open the door for potential discrimination claims.

  • Example:  An applicant, a mother who tweets that her son is undergoing cancer treatments, is not hired.  She could bring a claim for association discrimination under the Americans with Disabilities Act (ADA), the California Fair Employment & Housing Act (FEHA), or even the Genetic Information Nondiscrimination Act (GINA).
  • Example: A decision not to hire an individual because he or she has sued a previous employer could violate laws prohibiting retaliation under antidiscrimination, wage and hour, or whistleblower statutes.
  • Example: The CA Department of Industrial Relations has interpreted Section 96(k), which prohibits employers from taking adverse action due to an employee’s lawful conduct outside of work, to apply to decisions not to hire employees, even though the statute does not explicitly reference hiring. 

Workplace Solutions:  The best practice is to avoid using social media in hiring decisions since there are serious legal risks involved.  If an employer would still “Like” to do this, the following steps can help you mitigate those risks:

  • Document the hiring process.  Include a checklist of the relevant hiring credentials that sets forth the scope of any lawful use of social media information (e.g., if a candidate’s social media background is relevant to the position being filled).
  • Wait Until You Extend the Offer.  If you make an offer and then later discover that a new hire has made a material misrepresentation about prior employment, etc., you can then record the offense.
  • Designate a Screener.  Have a non-decision-maker do the search and only have them report on permissible job-related information.  Filter out the rest.
  • Educate Your Employees.  Instruct HR and management employees to not conduct independent searches on prospective candidates.  Train and educate personnel on how information from or even accessing an individual’s profile on social media and the Internet may give rise to allegations of employment discrimination.
  • Be consistent:  If you are going to use social media in hiring, use it for all applicants, not just some. 
  • Be skeptical.  Remember, not everything on the Internet is true!