California Reference Check Laws: What Every Employer And HR Professional Should Know

An Introduction to California Reference Check Laws

Reference checks have become an integral part of the hiring process, giving employers crucial insight into potential hires. Both employers and applicants rely heavily on reference checks – and yet many employers are mistaken as to what they can ask of reference contacts and what such contacts can say. In some instances, employers manipulate their reference checks as a means of "interviewing" rejected applicants, which can have significant legal ramifications.
As a state with robust laws , California has strong laws governing what employers may not only ask during the course of a reference check but also how reference contacts may respond. Equally important, California law also restricts the individuals who can request an applicant’s former employer provide answers to pre-scripted questions as well as the manner in which an employer in California may disseminate a former employees’ information (regardless of whether the information is positive or negative). Accordingly, employers should know when using reference checks, California law:

California Employment Laws at a Glance

Employment laws in California are designed to protect the rights of employees. The reasoning behind these laws is to provide a sensible balance between employers’ need to run their businesses and employees’ need to thrive in their work environments. In addition, California laws work in tandem with federal laws, especially in the context of employment law. And, when it comes to reference checks, California laws simply take it a step further and require that employers comply with additional state-specific obligations.
In California, there are dozens of employment laws that govern all aspects of the employer-employee relationship. There are a few that are particularly relevant to reference checks. When conducting employment reference checks for former employees, employers should make sure that they comply with state-specific laws in addition to the Fair Credit Reporting Action. Reference checks intersect with California employment laws in the areas discussed below.

What Employers Can Legally Do During a Job Reference Check

Employers are allowed to discuss the following with a reference as it constitutes "statements the disclosure of which is required by law" and is therefore an exception to the general prohibition on disclosing information regarding a former employee’s Employment History.
Employment Dates
In California, an employer may disclose "the dates of employment during which the employing entity or one of its wholly owned subsidiaries employed the employee."
This exception allows some information to still be disclosed even where the employee’s overall record with the former employer was poor. For example, a former employer is not permitted to disclose any of the negative information regarding the employee’s performance, but they are still permitted to disclose the employment dates themselves and that the employee was terminated.
Title
Employers can also disclose the "job title and privileges of the employee." The term "privileges" can be interpreted broadly if the job title itself does not reflect the level of responsibility granted to the employee in their performing of job duties, such as assistant vice president, vice president, chief financial officer, senior vice president, and chief executive officer. Otherwise, if the general job title is sufficiently descriptive, the specific job title is unnecessary in light of the broader job category. As noted in the Department of Fair Employment and Housing Occupational Licensing Policy Statement:
If A is manager of the mortgage department, it suffices that the reference check ask for "manager of mortgage division," without need to name specific department."
Job titles such as cashier, chief executive officer, accountant, or sales associate are not sufficiently descriptive, whereas the "senior account manager, chief engineering officer, and eastern regional sales associate" job titles provide more context.
Address
The reference disclosures permitted by Cal. Civil Code § 1786.53(b) also include providing "the address of the employing entity’s local office where the employee reported to work."
Wage Information
Finally, employers can reveal "the rates of pay, including amounts paid per hour, per day, per shift, per commission, or otherwise." Cal. Civ. Code § 1786.53(b)(1).
Reference check requests are always better when an applicant has provided written permission for the inquiry prior to the reference check. In addition to the above exceptions, employers can obtain other information about a former employee if requested by the former employee’s current or prospective employer.

What Employers Can’t Do During a Job Reference Check

Several practices are specifically prohibited during the reference check process under California law. For example, it is unlawful for an employer to do the following:
• Ask about race or any other protected category. California employers cannot ask about a job applicant’s race or other protected categories such as age, religious affiliation, membership in an unincorporated group or association, or intimation of membership, or disability status. Such inquiries by the prospective employer could lead the reference to disclose information that is confidential under California law and if this information were shared with the reference or was relied on by the employer in making its decision, the employee could claim the information was disclosed in violation of his or her rights of confidentiality and privacy.
However, the California courts have recognized an exception to the rule and held that any suit that might be brought by a former employer under the Confidentiality of Medical Information Act (CMIA) may be defended by the former employer if the CMIA-protected information was revealed to the applicant’s prospective new employer for the purpose of obtaining or retaining employment and the disclosure was authorized.
• Ask if the employee has a medical condition that could affect the job for which he/she was applying and to make further inquiries into the employee’s condition.
According to the California Compensation Insurance Rating Bureau, a former employer can verify certain "non medical" information related to an employee’s claim for workers’ compensation benefits. But the employer cannot legally disclose its confidential medical information, which includes the nature and duties of the applicant’s former employment, to the prospective employer, or its representative.
Employers should also be careful about asking a reference whether the applicant ever complained of work-related injuries or accidents. Such inquiries could raise some employment law issues under California’s Workers’ Compensation Act and could reveal information that is confidential under the CMIA. The CMIA protects all medical information from disclosure without the patient’s written authorization except as otherwise provided in benefits programs, in this instance, a workers’ compensation claim.
• Give performance evaluations of the applicant. Some employers have omitted from their applications "favorable" evaluations of applicants. California law does not require employers to provide performance evaluations of their employees.
Employers can ask the former employer about other matters such as whether the applicant conducted a personal business on company time, whether the applicant was involved in theft of company property, whether the applicant was late to work, whether the applicant took unscheduled absence, and if he or she resigned voluntarily. When performing background checks, employers should not ask for references from former employers until after the applicant has been interviewed and selected for hiring.

Rights and Protections for the Employee

As employees, it is vital that you understand your rights in the reference-check process. If you know your rights, then you can more easily detect when an employer is contravening those rights. Knowing about the laws that protect you is important because they are not uniformly applied or enforced. Even at the risk of sensationalism, some employers don’t care about the law and are willing to engage in unfair practices, even though it might come back to haunt them.
In California, individuals are protected against providing certain negative information as part of the reference check process. California is a two-party consent state when it comes to criminal history. Its laws offer protections for current and former employees.
In California, however, information about prior convictions, felony or misdemeanor, is not protected by the laws relating to reference checking. It should be noted that this protection is only as preventative to people who are calling former employers directly or through a third-party service. If an employee has a criminal conviction, the employee should be proactive in revealing the conviction to the prospective employer (if it is, indeed, relevant to the hiring decision). The prospective employer could get a thorough background check on the employee prior to offering employment and then terminate him (or her) at that time. The employee could then claim that he was never given a chance, which might affect the way a court may view the situation if it ends up in litigation.
Additional protections include the laws relating to employment services or other private companies that perform reference checks for prospective employers. These companies, like public employment agencies, are bound by California Government Code section 432.8. These government provisions refer to what persons cannot be told about an employee’s character. California courts have interpreted this to mean that a prospective employer cannot be told about an employee’s sexual conduct. In addition to the laws on sexual conduct, any medical or psychological conditions that were revealed or exist also cannot be revealed. Neither can an employer discuss the "termination of the employee due to unsatisfactory performance."
What about extending these laws to other areas? If an employer also performs credit checks on employees, California Labor Code 1024.5 is clear that employers and other personnel service organizations must obtain express authorization from the employee before conducting the credit report. This can be a benefit to employees if they believe that they won’t pass a credit check.
The California Department of Fair Employment and Housing (DFEH) investigates employment discrimination that occurs in all areas of employment, including hiring, termination, promotions, compensation and other terms of employment. This includes disability discrimination based on an applicant’s medical history and inquiries about sickness or disability. This also covers alleged violations of the California Fair Employment and Housing Act. Federal law under Title VII of the Civil Rights Act, 42 U.S.C. Section 2000e prohibits discrimination in employment based on race, gender (sex), religion or national origin. Federal law also prohibits discrimination based on age.
Even if the company does not engage in these practices, if a potential employer reveals something that is not specifically allowed for re-disclosure by an employer or a third-party source, you may have an opportunity for recourse.

Defamation and Compensation Issues

The potential for liability and the specter of defamation claims pose legitimate concerns for employers providing references on former employees. Under California law, a former employer may be held liable for statements made about a former employee provided those statements are unprivileged or defamatory. As such, an employer will face the threat of a lawsuit where it is alleged that the reference provided did not consist of an "honest opinion" but rather was based upon false information or a personal motive to injure the former employee or to assist the employer in some manner. The subject matter of an honest opinion must also be limited to matters properly accepted by the employer. Finally, the reference must be given for some purpose related to the former employee’s business and/or profession otherwise it could be found to be defamatory. A demoralized terminated employee sometimes sues his or her former employer because the reference provided to prospective employers was unflattering. California law is abundantly clear that an employer is under no legal obligation to provide an applicant with the benefit of favorable comments from a reference. Rouse v. Law Offices of Larry D. Friedman (1998) 67 Cal.App.4th 156. For example , in Rouse, former employees sued their prior employer because the singing of a Confidentiality and Non-Disclosure Agreement prohibited the reference evaluator from providing an unqualified recommendation that would have otherwise assisted the former employees in securing new jobs. The trial court granted summary judgment in favor of the former employer finding the CND Agreement enforceable as to the facts that "he would have verified or confirmed if the [former employee] had signed some kind of consent." The Court of Appeal affirmed the summary judgment as to possible breach of contract claims because the former employee failed to provide the court with any legal authority in support of his arguments and the CND Agreement unambiguously prohibited reference checking of employees who had signed it absent written approval. Therefore, the agreement could not plausibly be interpreted as obligating the former employer to offer favorable references that the applicant admittedly declined to sign and for which he had no obligation to sign.

Federal Laws and Regulations to Stay Within

Section 5 – Conforming To Federal Law
Many other federal laws are implicated when employers check references. While bringing this blog post to a conclusion, I urge you to be aware of the following considerations:
Federal Privacy and Copyright Laws: It is important to consult before checking with current/former employers to avoid running afoul of the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA). Sufficient boundaries must be drawn to avoid information that is protected from disclosure under HIPAA from being revealed. CFR C2 164.502(a)(1-2) containing these privacy provisions should be consulted when considering HIPAA compliance if you need to reference an individual’s health information. Generally, California state law’s references to this HIPAA section are at California Civil Code 56.05 et seq., the Confidentiality of Medical Information Act.
Federal immigration laws must also be consulted. The United States Citizenship and Immigration Services (USCIS) has an obligation to comply with federal privacy laws which includes laws governing the disclosure of sensitive personal information and personal identifying information. Employers must also ensure that they comply with these laws when conducting employee background checks.
Federal employment discrimination laws, including the federal Age Discrimination in Employment Act (ADEA), the federal Americans with Disabilities Act (ADA) and the Fair Credit Reporting Act (FCRA) apply when employers conduct employee background checks. They must comply with state as well as federal laws.
Employers must also ensure that their information practices conform to the Fair Labor Standards Act (FLSA) and to the Fair Credit Reporting Act (FCRA) and related State laws. See also Dyer v. Northern On-Line, Inc., 303 F. Supp. 2d 391 (D. Conn. 2004).

Do’s and Don’ts When Conducting Reference Checks Surrounding Employment

Best Practices for Employers and HR Professionals on Reference Check Compliance
In light of the above, here are some best practices when doing reference checks:
Prefer non-California law
As discussed above, California law provides a fair amount of protection to employees from negative references. Whenever possible, try to do the reference check in the context of renewed employment or promotion. This is the only time when California law deems a consent to be given.
Ensure that the consent is not in violation of the courts’ strict interpretation of "purely subjective" or vague opinions of the employee. Do not ask if you think the former employee is pleasant, friendly or courteous. Those terms are considered (when not referenced in the context of some work standard) as purely subjective.
Prior to giving a reference be sure to weigh carefully the good against the potential harm.
Warning to HR personnel
HR personnel risk substantial liability for ensuring compliance with their companies’ policies. Even if a company, as a matter of policy, authorizes HR employees to speak to prospective employers, HR personnel should exercise caution and review the report with a neutral or supervisor, as to distinguish the report from a personal opinion.
Yes, there is a fine line between being an effective human resources employee and protecting against unwarranted claims. But the question remains nonetheless: when in doubt, always verify the law and consult your lawyers before making a potentially defamatory statement against the former employee.

In Closing and Other Helpful Websites

In conclusion, California employers must be cognizant of the various legal restrictions when providing reference checks for former employees. Employers should remember the five categories of information that given rise to liability under California reference check laws:
• Disclosing a former employee’s immigration status;
• Providing an employment reference that contains false information that the employer knows to be false;
• Confirming the truth of a defamatory statement about a former employee;
• Providing discriminatory employment references; and
• Disclosing or threatening to disclose certain private information about a former employee.
Although California reference check laws can be strict and complicated , there are resources available to ensure compliance. Many law firms offer free online guides regarding California reference check laws. The website for Seyfarth Shaw LLP provides an overview of employment-related laws for each state; their guide for California can be found here. Another good resource is the California Employers Association, which has a California Reference Check Guide that includes links to the relevant statutes and court cases. Additionally, the Society for Human Resource Management (SHRM), an organization dedicated to serving human resource professionals, provides members with a reference check form that includes best practices for employers. Finally, many law firms, including Outten and Golden LLP, offer free, downloadable guides with best practices for conducting reference checks and addressing issues that might arise.