Background Checks for Independent Contractors in California: Laws That Impact Background Screening

Background Screening | March 6, 2023

Without a doubt, California is one of the most complex and cumbersome states in which to conduct background checks for independent contractors. With a myriad of consumer protection, data privacy, fair chance, and other laws regulating the space, organizations can easily be frustrated and quickly run afoul of the requirements. This blog will begin to cover some of the most relevant considerations for organizations that are conducting background checks for independent contractors located in this west coast, sunshine state.

Before we begin, it is important to note that contractor relationships, when it comes to the application of many laws, are not dissimilar from those which govern employees. In many cases, contractor inclusion may not be specifically noted in legislation so using the employee approach can be a conservative and prudent way to understand the obligations which may exist for organizations. The other fact to consider is that while these are unique and separate laws, regulations, and ordinances, it is quickly apparent there is a notable overlap and intersection between them that organizations must comply with.

Contractor Definition

California is one of about 20 states that maintain their own unique approach, separate from the Department of Labor-issued ruling to clarify whether a worker may be classified as an independent contractor versus an employee under the Fair Labor Standards Act (FLSA).  California’s AB5 ruling went into effect on January 1, 2020, while employers and independent contractors were already fighting to have their business models considered exempt. 

The California approach assumes workers are employees unless the worker passes a 3-point “ABC” test by meeting the following criteria:

1. A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
2. B) The person performs work outside the usual course of the hiring entity’s business.
3. C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

There are always exemptions, but California is unique in how active they have been in determining the appropriate definition for contractors. Combine this with the constantly changing DOL rulings and it is bound to create confusion among organizations with contractor networks. 

Consumer Protection

Along with the Fair Credit Reporting Act (FCRA), California has also implemented its own consumer reporting requirements which are found in the Investigative Consumer Reporting Agency Act ICRAA California Civil Code 1786 . While many ICRAA requirements mirror the FCRA obligations, there are additional stipulations around access to consumer reports, disclosures, additional notices which must be provided to the individual, and even timeframes for reporting criminal conviction information. In many cases, ICRAA is even more strict than the FCRA. Recently, it was also affirmed that ICRAA does not pose a conflict with the FCRA, meaning there is no preemption, and organizations must follow both Acts.

Ban The Box / Fair Chance

California is among the most prolific states – at the state, county, and city levels – for regulations and ordinances which support the reintegration of previously convicted felons into society. The theory behind this movement is that delaying, or not accessing criminal record information about an individual until they are deemed otherwise qualified for a position, may increase their chances of consideration for gainful employment and draws a tight line around what criminal information can, and should be used, to determine their eligibility. There are rights afforded the individual in the process to provide additional information around any mitigating circumstances their criminal history contains and to ensure an individualized assessment is completed on any relevant and potential adverse criminal information that is used in the decision to engage with the individual. 

In a typical regulatory fashion, the requirements posed by this approach do bleed over into the ICRAA and FCRA responsibilities as it relates to adverse action, timing, and content of prescribed processes. There may also be city and state requirements which must both be followed. It is important for organizations to ensure that they are in compliance with these requirements, while also keeping consumer reporting acts in mind. 

Marijuana Legalization

When considering background checks for contractors, many organizations will include a drug test. As marijuana continues to be legalized across the US, California has been a driver of this bandwagon. California became the first state to allow medicinal cannabis use when voters passed the Compassionate Use Act in 1996 and now also permits adult recreational cannabis use. With these legalization efforts, this state also took bold steps to decriminalize marijuana. This resulted in the amendment of previous lower-level marijuana convictions becoming unreportable. This is one such state where we see drug testing efforts impacting criminal record reporting. Furter, in 2024, Assembly Bill 2188 will make it unlawful for an employer to discriminate against, or penalize an employee, for cannabis use away from work. The bill also prevents employers from discriminating against workers and job applicants based on a drug screening test that detects “non-psychoactive cannabis metabolites” in hair, blood, or urine.

Use of Sex Offender Information

In line with the reporting limitations posed by ICRAA, Megan’s Law and the accompanying penal code also impact the reporting of criminal record information in this state. California’s Megan’s Law was enacted in 1996 and mandates the California Department of Justice notify the public about specified registered sex offenders. Megan’s Law website currently contains a database of the state’s list of more than 100,000 registered sex offenders. However, state law prohibits the use of the state’s sex offender registry information for employment purposes. California Penal Code section 209.46(l)(2)(E) prohibits the use of information disclosed on the website for purposes relating to health insurance, insurance, loans, credit, education, housing, and employment, among other uses. There are some exceptions for use “to protect a person at risk,”, as well as for employers required by law or authorized to request criminal history from the California Department of Justice. 

This, combined with the 7-year reporting limitation on convictions in the state, means that it is possible that the underlying criminal conviction which yielded the Sex Offender registration may not be reportable in California and that the sex offender registration alone may not be actionable by an employer. This may make it difficult for organizations to obtain the relevant and detailed information needed to ascertain if the individual may pose a risk to the organization, its customers, or other network participants. 

With California having one of the largest state populations, organizations would be well advised to be aware of their various legal obligations when conducting background checks for independent contractors in this area. This list is not at all exhaustive but serves to demonstrate that this is treacherous territory for background checks and additional consideration should be given to local, state, and federal laws.

Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel with respect to their obligations and use of PlusOne Solutions services.

About PlusOne Solutions

PlusOne Solutions has been an industry leader in the risk management field by specializing in compliance programs that meet the complex challenges of geographically dispersed contractors, vendors, and employee networks. PlusOne Solutions protects companies from possible financial, legal, and reputational risks associated with contractor and vendor relationships while creating safer work environments. To learn more, visit https://www.PlusOneSolutions.net.