California Court Clarifies Fair Chance Act’s Key Limits

California’s Fair Chance Act restricts an employer’s ability to use criminal background checks in the hiring process but does not require employers to hire every applicant with a conviction history.

A recent California Court of Appeal decision provides valuable guidance on employer obligations for evaluating an applicant’s conviction history, including:

• A court will not substitute its judgment for the employer’s judgment with respect to the individualized assessment component of the Fair Chance Act; and
• The applicant must show actual harm in order to recover damages because the employer did not follow the procedural steps set forth in the Fair Chance Act (McInerney v. The Regents of the University of California, No. B339467 (September 18, 2026)).

What Happened

In this case, between March 2005 and June 2007, the applicant was convicted four times on charges related to controlled substances, including twice for felony possession of a controlled substance for sale, and was sentenced to two years in prison.

In 2021, roughly 14 years later, he applied for and was given a conditional offer of employment as an office assistant. After the applicant authorized a background check, the employer became aware of the applicant’s previous convictions and, during their individualized assessment, determined these convictions may disqualify him from employment. In its assessment, the employer noted that the position would have contact with the campus community, including students. It considered both the timing and number of the convictions.

The employer provided written notice of its findings to the applicant and advised him that he had five business days to provide additional information and that it would consider any supplementary documentation and information provided before making its final determination. The applicant didn’t offer any evidence of mitigation or rehabilitation and instead wrote several emails to the employer’s HR personnel threatening legal action.

The employer informed the applicant that he was disqualified from the position two days after providing its initial written notice, citing as the primary reason the applicant’s failure to provide a substantive response to the employer’s letter requesting evidence of rehabilitation or mitigation. The applicant sued for unlawful discrimination under the Fair Chance Act, among other complaints.

Courts Will Not Reevaluate an Employer’s Individualized Assessment

One of the most significant holdings in the case involves the individualized assessment requirement.

Under the Fair Chance Act, an employer that identifies potentially disqualifying criminal history must conduct an individualized assessment. The employer must consider factors such as the nature and gravity of the offense, the time that has passed since the offense or completion of the sentence and the nature of the job.

The court made clear that the Fair Chance Act requires employers to conduct this assessment. It does not require courts to determine whether the employer reached the “right” conclusion.

For employers, this is an important distinction. The focus should remain on conducting a thoughtful and documented assessment rather than trying to predict whether a judge or jury would agree with the ultimate hiring decision.

Process Matters

In its decision, the court also emphasized that employers must carefully follow the Fair Chance Act’s procedural requirements.

When an employer intends to deny employment because of an applicant’s criminal history, the law requires specific notices as well as an opportunity for the applicant to respond. In this case, the employer did not provide the full response period required by law before making its final decision.

That procedural misstep created a potential violation even though the employer had otherwise complied with the law.

Technical Violations Do Not Automatically Create Liability

The applicant argued that the employer’s failure to provide the full statutory response period was enough to establish liability. The court disagreed.

Instead, the court held that an applicant must show actual harm resulting from the procedural violation. In other words, a technical mistake alone does not automatically result in recovery. An applicant must demonstrate that the violation made a difference.

This aspect of the decision provides an important potential defense for employers. While compliance remains critical, not every procedural error automatically results in damages.

Final Thoughts

The Fair Chance Act continues to impose significant obligations on California employers, but this decision confirms that the statute requires a fair process rather than a particular outcome. Employers that carefully document their individualized assessments and strictly follow the Fair Chance Act’s procedural requirements will place themselves in the strongest position to defend their hiring decisions.

It is important to note that many locations within California have enacted their own fair chance laws that have different requirements from California’s Fair Chance Act, including the city of Los Angeles, Los Angeles County, San Diego County and San Francisco. If you have employees working in these locations, it is important to adhere to familiarize yourself with the specific requirements of the local ordinances to ensure compliance.

CalChamber members can read more about hiring and onboarding, review a criminal background screening checklist or obtain a Notice of Preliminary Decision to Withdraw an Employment Offer in the HR Library. Not a member? Start your free 7-day trial membership today!