California Employment Background Screening Laws in 2025: A Comprehensive Guide

Introduction

Navigating California’s employment laws in 2025 can feel overwhelming. Employers must comply with strict background screening regulations. These rules ensure fair hiring practices. They also protect job applicants from discrimination. This guide breaks down key laws, including criminal history limits, Ban-the-Box rules, credit report restrictions, and AI usage. Let’s dive into the details.

Overview of California Background Screening Framework

California regulates background screening through intertwined federal and state statutes. The Fair Credit Reporting Act (FCRA) sets nationwide baselines. However, California layers on extra protections under the Investigative Consumer Reporting Agencies Act (ICRAA) and the Consumer Credit Reporting Agencies Act (CCRAA). The state also enforces the Fair Chance Act and municipal ordinances that expand applicant rights. Therefore, employers must harmonize federal, state, and local mandates before requesting criminal background checks or credit data.

Criminal Offense Lookback Period and Disqualifying Crimes

Under the FCRA, consumer reporting agencies may not list arrest records older than seven years that did not end in conviction.

California mirrors this limit in California Civil Code §1786.18 Article 2(a)(7): “Records of arrest, indictment, information, misdemeanor complaint, or conviction of a crime that, from the date of disposition, release, or parole, antedate the report by more than seven years. These items of information shall no longer be reported if at any time it is learned that, in the case of a conviction, a full pardon has been granted or, in the case of an arrest, indictment, information, or misdemeanor complaint, a conviction did not result; except that records of arrest, indictment, information, or misdemeanor complaints may be reported pending pronouncement of judgment on the particular subject matter of those records.”

Employers may still consider convictions. Yet they must evaluate them under the Fair Chance Act’s individualized assessment rules. They should weigh:

1. The nature and gravity of the offense.
2. The time elapsed since the conviction.
3. The nature of the job sought.

For regulated roles—such as childcare, elder care, law enforcement, and positions requiring a fidelity bond—California or federal law expressly bars certain convictions. Examples include:

• Violent felonies (e.g., murder, robbery).
• Sex offenses requiring registration.
• Embezzlement for fiduciary or financial jobs.

Consequently, you should document each decision to show compliance with DFEH Fair Chance regulations.

Ban-the-Box Laws (Statewide and Municipal)

Statewide Fair Chance Act

Since 2018—and expanded in 2023—the Fair Chance Act prohibits covered employers from asking about criminal history on an initial application. It applies to any employer with four or more employees. Additionally, it demands a conditional job offer before running a background report. The statute appears in Gov. Code §12952.

Process Checklist

1. Make a conditional offer.
2. Obtain written consent for the report.
3. Review results and conduct an individualized assessment.
4. Send a pre-adverse action notice with a copy of the report if you intend to disqualify.
5. Wait a minimum of five business days for the applicant’s response.
6. Issue the final decision with an adverse action notice if necessary.

Municipal Enhancements

Several cities strengthened protections. Notably:

• Los Angeles – extends waiting period to five business days after receipt of applicant rebuttal (LA Fair Chance Initiative).
• Los Angeles County Requires Workplace Posting.
• The Ordinance prohibits covered employers from preventing or discouraging applicants or employees with a criminal history from applying for or responding to job solicitations, postings, announcements, and advertisements.
• San Francisco – covers employers with five or more workers and bans consideration of convictions older than seven years for many jobs (SF Fair Chance Ordinance).

Exempt Positions

The law does not cover:

• Peace officers and other roles at criminal justice agencies.
• Positions requiring state or federal criminal background checks.
• Jobs that require a fidelity bond where a conviction automatically disqualifies a candidate.

Employment Credit Reports Restrictions

California leads the nation in limiting employment credit checks. Labor Code §1024.5 allows credit inquiries only for roles that meet at least one of these criteria:

• Managerial positions (defined as regularly exercising independent judgment).
• Jobs in the financial sector or those handling $10,000 or more.
• Positions with access to trade secrets or confidential customer data.

Therefore, routine hiring for clerical or retail staff may not involve credit pulls. Before requesting credit data, employers must:

1. Provide a clear written disclosure that complies with the FCRA.
2. Obtain written consent.
3. Follow the same pre-adverse and adverse action process as with criminal reports.

Moreover, employers cannot consider a numeric credit score, social security number, or account balances unless legally mandated. The California Department of Financial Protection and Innovation enforces these rules and may assess penalties for misuse.

Use of AI Background Checks

Automated screening tools surged in 2024. Consequently, many California employers deploy AI background checks to sift through thousands of applicants quickly. These systems extract data from court dockets, credit bureaus, and social media. They then flag potential red-flags in seconds.

Benefits

• Speeds decision-making and reduces manual errors.
• Identifies record discrepancies through pattern recognition.
• Integrates with applicant tracking systems for seamless onboarding.

Risks and Compliance Duties

However, AI may amplify bias if algorithms rely on skewed datasets. Therefore, California employers must audit AI outputs for disparate impact under Title VII and the Fair Employment and Housing Act. The 2025 update to the Fair Chance regulations clarifies that automated tools remain “background reports” under ICRAA. Consequently, you must still issue pre-adverse action notices generated by AI findings.

The state legislature is also debating AB 331, a bill that would mandate annual bias testing for high-stakes AI employment tools. Although not yet law, prudent employers should follow emerging guidance from the California Privacy Protection Agency.