California Fair Chance Act: A Small Business Guide

If your job application has a checkbox that asks whether an applicant has ever been convicted of a crime, you may already be breaking California law.

California's Fair Chance Act has been on the books since January 1, 2018. Most small business owners I talk to have never heard of it. That matters, because the California Civil Rights Department ramped up enforcement significantly in 2025 and 2026, settling cases against employers ranging from Amazon and IKEA to a county government. Small businesses are not exempt from that scrutiny.

Here is what the law requires, what it prohibits, and what you actually need to change in your hiring process.

What the Fair Chance Act Is

The Fair Chance Act, codified in California Government Code Section 12952, is California's version of what employment attorneys call "ban the box." The name comes from the checkbox on job applications asking about criminal history. The law bans that box.

The rule is straightforward: you cannot ask about an applicant's criminal history until after you have made them a conditional offer of employment. No checkbox on the application. No question during the interview. Nothing about prior convictions until the person is already your top candidate and you have decided you want to hire them.

The law was strengthened by amendments that took effect October 1, 2023, which expanded the individualized assessment requirements and gave the California Civil Rights Department more tools to enforce it.

Who It Covers

The Fair Chance Act applies to employers with five or more employees in California. That threshold includes part-time workers.

If you run a restaurant in Garden Grove with six employees, you are covered. A salon in Laguna Niguel with four stylists and one receptionist is covered. A two-person operation with the owner and one employee is not.

Most small businesses in Orange County hit that threshold. If you are not sure whether you do, count everyone on payroll, including part-timers and recent seasonal hires.

What You Cannot Do

The list of prohibited actions is longer than most business owners expect.

On job applications: Remove any question about conviction history. A checkbox asking "have you been convicted of a felony" is a Fair Chance Act violation the moment you include it, before anyone even applies.

In job postings: You cannot state that applicants with criminal records will not be considered. Language like "must have clean criminal background" or "no felonies" in a job ad is prohibited. You can note that a background check is part of the process. You cannot imply automatic disqualification.

During interviews and phone screens: You cannot ask about criminal history at any point before making a conditional offer. That includes casual questions like "have you ever had any legal trouble" or "do you have anything that would show up on a background check."

What you can never consider: Arrests that did not result in a conviction, sealed records, expunged records, juvenile records, and participation in diversion programs. These are completely off-limits regardless of when you ask about them.

The Order of Operations

The Fair Chance Act does not eliminate background checks. It changes when they happen.

Here is the process that keeps you compliant:

First: Screen and interview applicants entirely on qualifications. Ask about experience, availability, reliability, and anything relevant to the job. If you use a structured screening process, this is where it all happens. Decide who you want to hire.

Second: Make a conditional offer. Tell the candidate you want to hire them, contingent on a background check. Get their signed consent to run the check.

Third: Run the background check through a licensed Consumer Reporting Agency. Use one that follows California law. A reputable provider will know what they can and cannot legally report.

Fourth: If the results come back clean or with nothing relevant to the job, proceed with onboarding. If something comes back that concerns you, you cannot simply rescind the offer. You have to follow the individualized assessment process.

The Individualized Assessment

This is the part most small business owners do not know about, and it is where most Fair Chance Act violations actually happen.

If you are considering withdrawing a job offer because of a conviction in the candidate's background, you must conduct an individualized assessment. You cannot use a blanket policy. You cannot say "we do not hire people with felonies." You have to actually evaluate whether this specific conviction is relevant to this specific job.

California law requires you to consider three things:

1. The nature and gravity of the offense

2. The time elapsed since the conviction or since the person completed any sentence

3. The nature of the job and whether the conviction is directly related to the job duties

A conviction for shoplifting from ten years ago may have no bearing on someone applying to cut hair at your salon in Dana Point. A recent conviction for financial fraud may be directly relevant to someone who would be handling your cash drawer. The law is asking you to make that distinction honestly, document it, and apply it consistently.

The Written Notice Requirement

If you decide after the individualized assessment that you want to rescind the offer, you cannot simply tell the candidate "you did not get the job." California law requires a specific written process.

Step 1: Send the candidate a written preliminary notice. This must include a copy of the conviction history report you received, a description of your preliminary decision to rescind or delay the offer, and a copy of the California Civil Rights Department's official notice of their rights.

Step 2: Give the candidate at least five business days to respond. They have the right to provide evidence that the record is inaccurate, or to submit context, such as letters of reference, rehabilitation certificates, education completed since the conviction, or an explanation of the circumstances.

Step 3: Consider whatever they submit. You do not have to be persuaded. But you have to actually look at it.

Step 4: If you are still rescinding the offer, send a final written notice. This should explain your decision and inform the candidate of their right to file a complaint with the California Civil Rights Department.

This entire process needs to be documented. If a complaint is ever filed against you, the documentation is what protects you.

What Enforcement Looks Like in 2026

The California Civil Rights Department has made Fair Chance Act enforcement a priority. In 2025 and 2026, the CRD settled cases against major employers including Amazon, IKEA, the Los Angeles Dodgers, and others over alleged Fair Chance Act violations. A Tehama County case resulted in a $50,000 settlement.

Closer to home, the March 2026 Orange County employment law cases highlighted that local employers are facing increased scrutiny on hiring compliance. San Diego County added its own layer of enforcement, with the local labor office now authorized to impose penalties of $5,000 for a first violation and up to $20,000 for repeat violations.

The most common violations the CRD sees are not complicated. They are application forms with the conviction checkbox still on them. Job postings that say "must have clean record." Employers who ran a background check before making an offer. These are easy to fix now. They are expensive to fix after a complaint arrives.

Why the Law Exists

Roughly one in three American adults has some kind of criminal record, according to the Bureau of Justice Statistics. In California, that translates to tens of millions of people who could be filtered out of your applicant pool before you ever see their qualifications.

The law is not asking you to ignore criminal history. It is asking you to look at the person first, then the record, and then evaluate whether the record actually matters for the job at hand. In practice, for most hourly roles in Orange County, the vast majority of convictions you will encounter in a background check will have no bearing on whether someone can do the work.

A person who had a DUI in 2018 and wants to wash dishes at your restaurant is not a risk because of that DUI. A person who had a theft conviction last year and wants to manage your cash register may be. The law is asking you to make that call thoughtfully rather than reflexively.

The Most Common Mistakes OC Business Owners Make

Using an old application form. If you downloaded a job application template online several years ago, check it. Many still include a conviction history section. Take it out.

Asking too early. Running a quick background check before calling someone in for an interview is not compliant. Even if the check is informal, the law requires you to wait.

Blanket policies. "We do not hire anyone with a criminal record" is not a legal policy in California for businesses with five or more employees. Every situation requires an individualized look.

Skipping the notice and waiting period. Even when a conviction clearly concerns you, the law requires the written notice and five-business-day response window before you can finalize a decision. This step cannot be skipped.

Not documenting the assessment. Without documentation, you have no way to show a state agency that you followed the process. Keep records of the report, your assessment, and any response from the candidate.

Building This Into Your Process

You do not need an HR department to comply with the Fair Chance Act. You need a clean workflow and a few updated documents.

Start by pulling your job application form and removing any question about criminal history. Then review any job postings you have active and remove language that implies automatic disqualification.

Brief anyone who conducts phone screens or interviews. They should know not to ask about criminal history under any circumstances before an offer is made.

When you are ready to hire someone, make the conditional offer first. Run the background check after. If results require a closer look, follow the individualized assessment steps and document your reasoning.

For more on what happens after the background check comes back, the guide on background checks for small business hiring in California covers how to choose a background check provider and what the report actually contains.

And if you want to make sure your entire interview process is legally sound, the piece on interview questions you cannot ask in California covers the other prohibited questions that trip up small business owners, from age to national origin to marital status.

Where My Friendly Staff Fits In

One of the side benefits of using AI-powered phone screening is that the initial screening stage stays focused entirely on qualifications. The AI asks about experience, availability, and fit for the role. It does not ask about criminal history. That keeps your process compliant from the start and means you are evaluating candidates on what actually matters before a background check ever enters the picture.

For a broader look at how to build a legally sound hiring process from the ground up, how to hire employees for a small business covers the full sequence. And to make sure you have the right paperwork in place once someone is hired, the California new hire paperwork checklist walks through exactly what needs to be completed on day one.

The Bottom Line

The Fair Chance Act does not require you to hire people with criminal records. It requires you to give them a fair look before you decide not to.

For most small businesses, the compliance changes are minimal. Update your application. Do not ask about criminal history before you make an offer. If a background check raises concerns, follow the individualized assessment process and document your reasoning.

The employers who get into trouble are the ones who never updated their application forms, who keep using blanket disqualification policies, or who run a quick background check before deciding who to call in. Those are easy habits to fix.

Get your paperwork updated now. The CRD is paying attention, and an Orange County small business that takes its time on this is not protected by its size.