California Peculiarities

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:
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By Robert Milligan and Joshua Salinas

California is a unique jurisdiction because of its public policy against certain employee noncompetition agreements and post-termination restrictions on employee mobility. This general prohibition against noncompetes with employees  leaves trade secret laws as the primary mechanism for employers with California based employees to protect against the unlawful use or disclosure of valuable company information and related competitive issues when key employees join competitors.

Yet many employers fall short in protecting trade secrets through the inadequate handling of employee departures.  Moreover, many companies fail to understand the potential liability that may arise with the unlawful acquisition of a competitor’s trade secrets when interviewing and onboarding a competitor’s employees.

In this first video of a two-part series, we illustrate some bad practices when interviewing a competitor’s employees, as well as handling your own employees’ departures, regarding the protection of trade secrets and other confidential information.  During the video, a prospective candidate offers to share during his employment interview his current employer’s trade secrets regarding sensitive business and customer information for the Southern California market.

When watching the video below, consider the following:

  • What concerns do you have about anything the interviewer did?
  • What concerns about what the prospective employee did?
  • How about the current employer?
  • What type of policies and procedures could both the current employer and prospective employer put in place to better protect themselves?

Click below to discover some of the bad practices illustrated in the video.
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By Shireen Husain, Kristina Launey, and Laura Maechtlen

In 2013, the Legislature made significant changes to California’s Fair Employment and Housing Act, including empowering the Department to file civil actions directly against employers, authorizing the award of attorneys’ fees to the Department, and creating the Fair Employment and Housing Council.

The Council has been feverishly proposing and enacting regulations pursuant to its new authority, including proposed amendments to the Fair Employment and Housing Act (FEHA) regulations.  If enacted, these amendments could mean substantial changes to your sexual harassment and discrimination policies and procedures.

What’s new?

Last Thursday, the Council met to consider amendments.  Currently before the Council is a proposed new section 11023, entitled Harassment and Discrimination Prevention and Correction, which would require employers to develop  written sexual harassment and discrimination policies that:

  • Specifically address the liability of supervisors
  • Create a “confidential” complaint process (although employers should not promise that the investigation will be completely confidential)
  • Provide for complaints through channels other than the complaining employee’s direct supervisor
  • Designate a company representative to receive complaints and facilitate internal resolution of disputes
  • Provide for fair, timely, and thorough investigations of complaints and provides due process to all parties
  • Are provided to all employees with an acknowledgment return form or using a method that ensures employees receive and understand the policies
  • Are provided in every language that is spoken by at least 10% of the workforce

In addition, the amendments include a 2 year record retention requirement for all sexual harassment training materials, including sign in sheets and course materials.  Training must include information regarding potential employer and individual liability in civil actions and highlight supervisors’ obligations to report sexual harassment, discrimination and retaliation.

Important Highlights

While many of the proposed amendments do not substantively change the law, the changes may be an indication of the focus of the Council in 2014 and a good reminder of employer best practices.  Don’t forget:
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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.