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California Bans Inquiries Into Applicant’s Salary History, “Bans the Box” On Criminal History Inquiries

California Governor Jerry Brown signed two major pieces of legislation affecting the application and hiring process for nearly all employees. AB 168 prohibits employers from seeking salary history information about an applicant for employment, among its related provisions. AB 1008 “bans the box” on employers’ applications asking about criminal conviction history. Instead, employers will be able to inquire into, and consider, an applicant’s conviction history only after making a conditional offer of employment. They also must follow certain particular steps before rejecting an applicant because of a criminal conviction. Both bills will require nearly all employers to make changes to their application and hiring processes. These new laws are effective on January 1, 2018.

Ban on Inquiry into Salary History and Related Provisions

Under AB 168, California law will bar all employers from seeking salary history information, including information about compensation or benefits, about an employment applicant. The bill prohibits an employer from making such an inquiry “orally or in writing, personally or through an agent.” As a result, employers will need to remove questions about such information from their employment applications and not ask such questions in interviews or other discussions.

The Governor’s signature on AB 168 is a reversal from his veto of AB 1017 in 2015. Then, Governor Brown vetoed AB 1017, because it “broadly prohibits employers from obtaining relevant information with little evidence that this would assure more equitable wages.” He urged giving other legislation toughening the California Equal Pay Act “a chance to work before making further changes.”

AB 168 further bars employers from relying on an applicant’s salary history information as a factor “in determining whether to offer employment to an applicant or what salary to offer an applicant.” However, the new law does not apply to salary history information disclosable to the public under federal or state law. It also does not prohibit an applicant from disclosing salary history information to a prospective employer, “voluntarily and without prompting.” If an applicant makes such a voluntary disclosure, the law “shall not prohibit that employer from considering or relying on that voluntarily disclosed salary history information in determining the salary for that applicant.”

Currently, while California law allows inquiries into salary history, Labor Code section 1197.5 provides that “[p]rior salary shall not, by itself, justify any disparity in compensation” between employees based on sex, race, or ethnicity. This provision also will continue to be the law and must be considered, such as in cases where an applicant’s pay history is or becomes known, as allowed by law.

In another important provision, AB 168 requires that an employer, “upon reasonable request,” provide “the pay scale for a position to an applicant for a position.” Employers need to be prepared for such inquiries. In many cases, a formal pay scale may not exist for a position. One of the purposes of AB 168 and other recent legislation is for employers to pay what they believe a position is worth, without regard to an applicant’s pay history or relying on that information.

Major Changes Regarding Criminal History Information

Currently, California law prohibits employers from making inquiries into, or considering, certain aspects of an individual’s criminal history. Among its provisions, Labor Code section 432.7 prohibits employers from considering arrests that did not result in conviction or pending charges; referral to, or participation in, diversion programs, which result in dismissal of charges or a conviction after successful completion; juvenile court adjudications; or convictions that have been sealed, dismissed, or expunged. However, the law allows California employers to consider most other criminal convictions, except for certain marijuana offenses.

Under AB 1008, California employers still will be allowed to consider criminal history information, but following a much different process. Most significantly, AB 1008 prohibits any question on an employment application that seeks the disclosure of an applicant’s criminal history. It also bars inquiring into, or considering, the conviction history of an applicant “until after the employer has made a conditional offer of employment to the applicant.” AB 1008’s new terms apply to employers with five or more employees in California.

The most important change is that AB 1008 requires employers to remove common language from employment applications inquiring into an employee’s conviction history. Employers also will not be able to make these inquiries in the interview process or other discussions, before making a conditional offer of employment. The objective of AB 1008 is to determine an individual’s qualifications and, if an individual is most qualified, result in a conditional offer of employment before any consideration of the individual’s criminal record.

When an employer inquires into an applicant’s criminal background following a conditional offer, the employer still cannot consider (or disseminate or distribute information about) arrests that did not lead to conviction; referral to, or participation in a diversion program; or convictions that have been sealed, dismissed, expunged, or statutorily eradicated. The provisions of Labor Code section 432.7, discussed above, also remain in effect.

An employer that intends to deny an applicant a position “solely or in part because of the applicant’s criminal history” must follow certain steps. The employer must make “an individualized assessment” concerning whether the conviction history has a “direct and adverse relationship” with the specific job duties of the job sought. In this assessment, the employer must consider: (1) the nature and gravity of the offense and conduct; (2) how much time passed since the offense or conduct, and completion of sentence; and (3) the nature of the job sought. AB 1008 provides that an employer “may, but is not required to, commit the results of this individualized assessment to writing.”

If an employer determines that an applicant’s criminal conviction history disqualifies him or her from employment, that decision is only preliminary. It can become final only after certain further steps. The employer must notify the applicant of the preliminary decision in writing. It “may, but is not required to, justify or explain the employer’s reasoning for making the preliminary decision.” Yet, at a minimum, the notification must contain all of the following: (1) Notice of the disqualifying conviction or convictions (as in a case of multiple convictions, which not all may be disqualifying) that are the basis for the preliminary decision to rescind the offer; (2) a copy of any conviction history report; and (3) an explanation of the applicant’s right to respond within at least five business days before the decision becomes final, including that any response may include submitting evidence disputing the accuracy of the conviction history report, or information about rehabilitation or mitigating circumstances.

The employer’s preliminary decision cannot become final during the response period. If the applicant notifies the employer “in writing” and “within the five business days” that he or she “disputes the accuracy of the conviction history report” and “is taking specific steps to obtain evidence,” the employer must give the applicant five additional business days to respond. AB 1008 gives no guidance on whether additional time must be allowed for mailing.

The employer must consider any additional evidence from the applicant. If the employer then makes a final decision to “deny an application solely or in part because of the applicant’s criminal history,” the employer again must notify the applicant in writing. Again, the employer “may, but is not required to, justify or explain the employer’s reasoning for making the final denial or disqualification.” The notice also must include any “existing procedure” the employer has for the applicant to challenge the decision or request reconsideration. AB 1008 does not require an employer to establish such a procedure, or to allow any appeal or reconsideration. In addition, the notice also must inform the applicant of the right to file a complaint with the Department of Fair Employment and Housing.

AB 1008 also contains narrow exceptions. It does not apply in certain public employment situations, to a positon as a farm labor contractor, or to positions where an employer or its agent “is required by any state, federal, or local law to conduct criminal background checks for employment purposes or to restrict employment based on criminal history.”

Next Steps for Employers

These two bills represent significant changes for California employers. Inquiries into an applicant’s previous pay are commonplace on employment applications, as well as in interviews and other discussions concerning prospective employment. Likewise, questions about criminal conviction history are common on employment applications, while background checks for criminal history also are common. The steps that now must be taken before rejecting an applicant based on criminal history are new. Thus, for nearly all California employers, these bills require changes in current practices. Accordingly, employers with employees in California are encouraged to have their counsel review their current policies and practices, as well as needed changes, in order to comply with these new laws.

Arent Fox’s Labor & Employment group monitors updates hiring regulations. For more information, please contact Robert K. Carrol, Paul R. Lynd, or the Arent Fox professional who regularly handles your matters.