On January 21, 2020, the Oakland City Council unanimously passed the of prior criminal history. It also impacts background check companies that offer a tenant screening product ("consumer reporting agencies") because they will have to modify their processes and procedures to ensure that information that is "off limits" to landlords and property managers is not included in a tenant screening report ("consumer report"). The Council will take a final vote on February 4, 2020. Given that Oakland is not the first jurisdiction to enact such an ordinance, and there are other similar laws pending across the country, background check companies need to monitor this evolving area of the law and take affirmative steps to avoid a class action.
Seattle Paved the Way for Laws Restricting Reporting and Consideration of Criminal History for Rental Housing Purposes
In the context of tenant screening, restrictions on consideration of criminal history appear to be gaining traction. The first such law was passed in 2017, when the City of Seattle enacted its own "Fair Chance Housing Ordinance." In Seattle, it now is an unfair practice for any "person" (broadly defined to include landlords/property managers and their agents) to, among other things, "[r]equire disclosure, inquire about, or take an adverse action against a prospective occupant, a tenant or a member of their household, based on any arrest record, conviction record, or criminal history." The exceptions are quite narrow, however, Seattle allows landlords and property managers to consider a tenant applicant's status as a registered sex offender (but an applicant only can be denied on this basis if there is a "legitimate business reason" to do so).
While at first blush it appears the Seattle ordinance only restricts the information that landlords and property managers may request and consider, Seattle's FAQ expressly states that "[u]nless there is an exclusion, neither landlords nor any person may run criminal background checks," adding that "any person" includes, but is not limited to "property managers, owners, screening companies, etc." As a result, we previously have recommended that background check companies consider modifying their processes to ensure that criminal history information is not reported to Seattle landlords and property managers, absent clear proof that an exception applies (e.g., sex offender registry status).
Oakland Follows the Trend With a More Comprehensive Ordinance
Citing a need "to give previously incarcerated persons or other persons with a criminal history a fair opportunity to compete for rental housing and to be able to reside with family members and others," and also to reduce the incidence of homelessness for persons with a criminal history, the FCHO will make it unlawful for a housing provider (e.g., landlord, property manager, etc.) to, "at any time or by any means, whether direct or indirect," inquire about a rental or leasing applicant's criminal history, require an applicant to disclose or authorize the release of their criminal history or, if such information is received, base an adverse action in whole or in part on an applicant's criminal history. Retaliation against any individual for exercising or attempting in good faith to exercise any protected rights under the FCHO is expressly prohibited.
"Criminal history" is broadly defined to include virtually any type of criminal record, regardless of how it is transmitted or obtained, and from whom, including one or more convictions or arrests, convictions that have been sealed, dismissed, vacated, expunged, sealed, voided, invalidated, or otherwise rendered inoperative by judicial action or by statute, juvenile records, or records reflecting participation in or completion of a diversion or a deferral of judgment program.
There are limited exceptions. First, it is not unlawful for a housing provider to comply with federal or state laws that require the housing provider to automatically exclude tenants based on certain types of criminal history, including, but not limited to:
- Ineligibility of Dangerous Sex Offenders for Admission to Public Housing (42 U.S.C. § 13663(a).
- Ineligibility of Individuals Convicted for Manufacturing Methamphetamine on Premises of Federally Assisted Housing for Admission to Public Housing and Housing Choice Voucher Programs (24 C.F.R. § 982.553).
If such a requirement applies, however, the FCHO states that the housing provider may not inquire about, require disclosure of, or, if such information is received, review an applicant's criminal history until after the housing provider does the following: (1) informs the applicant in advance that the housing provider will check for certain types of criminal history; and (2) requests written consent, or if the applicant objects, provides the applicant the opportunity to withdraw the rental application.
Next, a housing provider may review California's sex offender registry, provided that it (1) has stated the lifetime sex offender screening requirement in writing in the rental application, and (2) does not inquire about, require disclosure of, or, if such information is received, review an applicant's criminal history until after the housing provider:
- determines whether the applicant is qualified for the rental under all of the housing provider's criteria for assessing applicants (except for any criteria related to criminal history);
- provides to the applicant a conditional rental agreement that commits to providing the rental to the applicant as long as the applicant meets the housing provider's criminal history criteria with respect to the registry of lifetime sex offenders; and
- informs the applicant in advance that the housing provider will be checking the sex offender registry and requests written consent or, if the applicant objects, provides the opportunity to withdraw the rental application.
If a housing provider takes adverse action against an applicant based in whole or in part on their criminal history, it must provide a written notice to the applicant regarding the decision that includes, at a minimum:
- the reason(s) for the adverse action;
- instructions regarding how to file a complaint about the decision with the City;
- a list of local legal services providers, including contact information;
- a copy of any criminal history, background check report, or other information related to the applicant's criminal history that served as a basis for the decision; and
- an opportunity to respond with rebutting or mitigating information prior to the denial of the application.
Notably, the FCHO requires that the adverse action notice go above and beyond what the Fair Credit Reporting Act ("FCRA") and the California Investigative Consumer Reporting Agencies Act ("ICRAA") require. While both statutes require a notice that simply advises of the adverse decision, the right to submit a dispute, the right to request a copy of the report, and the contact information for the consumer reporting agency that furnished the report, the FCHO adds to these by requiring a copy of the report, an explanation for the decision, and an opportunity for rebuttal (in addition to the other information described above).
The FCHO also makes it unlawful for a housing provider to require reimbursement or payment from the applicant for providing any criminal history or criminal background check report.
The FCHO requires housing providers to follow additional requirements, such as posting a notice advising of applicants' rights (in a form to be published by the City), including a copy of that same notice with any rental or leasing application, and maintaining a record of any criminal history obtained for any applicant for a period of three years.
Aggrieved applicants can file a complaint with the City, who, upon the finding of a violation, may issue a civil penalty of up to $1,000 for each violation, recover the costs of any investigation or issuance of civil penalties, and/or issue a warning letter and assess costs in lieu of issuing a civil penalty for a violation. Alternatively, aggrieved applicants (as well as the City Attorney or a tax exempt organization whose mission is to protect the rights of tenants or incarcerated persons in Oakland or Alameda County) may file a civil lawsuit against the housing provider. Aside from equitable relief, damages may include liquidated damages (e.g., three times the greater of either actual damages (including damages for mental or emotional distress), one month's rent that the housing provider charges for the rental unit in question, or the fair market value of such rental unit); punitive damages; and attorney's fees and costs. The City Attorney also may include requests for civil penalties of up to $1,000 per violation.
Violations of the FCHO also are subject to criminal liability: an infraction for a violation, and a misdemeanor for a violation that is knowing and willful. Especially important for background check companies, the criminal penalties section of the FCHO recognizes an aiding and abetting theory of liability by stating that any person who "aids" a housing provider can be criminally responsible. Thus, like Seattle, background check companies should consider modifying their processes to ensure that criminal history information is not reported to housing providers in Oakland unless an exception applies and any request for such information comports with the procedural requirements set out above.
Increased Risk of Consumer Class Actions
Given the growing trend of reporting and restrictions on consideration of criminal history, there is an equivalent growing risk of consumer class actions against landlords, property managers, and/or background companies for non-compliance. Alternatively, an enterprising plaintiffs' bar may look to create a new basis to bring class action claims against these parties. Both providers and recipients of criminal history information for any purpose should evaluate state and local laws that regulate use of such of information, modify their policies and practices, and take steps to stay abreast of this evolving area of law.
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