San Francisco Just Doubled Hiring Fines to $4,000 — Is Your Business Compliant?

If your business hires anyone in San Francisco, the rules for background checks just got a lot more expensive to break. As of August 10, 2026, the city's amended Fair Chance Ordinance (FCO) is in effect, and the penalty for a repeat violation jumped from $2,000 to $4,000 per incident — on top of new restrictions on what employers can even ask about.

For a small restaurant, retail shop, or agency running multiple hires a month, a single sloppy background-check process could now carry real financial teeth. Here's what changed, who it applies to, and how to stay on the right side of it.

What the Fair Chance Ordinance already required

San Francisco's FCO isn't new — it's been on the books for years and applies to employers with five or more employees who are located in San Francisco or doing business in the city, regardless of where those employees actually work. The core rule has always been straightforward: employers cannot ask about a candidate's arrest or conviction history until after they've made a conditional job offer.

That means no criminal history questions on job applications, no background check pulled before an offer is extended, and no informal "have you ever been arrested" conversation during the interview. Once a conditional offer is made, employers can run a background check, but they still have to follow a specific process before rescinding that offer based on what they find.

What's new as of August 10

The amended ordinance adds two significant changes for employers to track.

Out-of-state records are now off-limits for certain conduct

Employers can no longer inquire about or rely on out-of-state arrests or convictions for conduct that is legal in California — specifically naming abortion-related healthcare, drag performances, and gender-affirming care. In practice, this closes a loophole where a candidate's record from another state, tied to conduct that isn't a crime here, could still be used against them in a San Francisco hiring decision.

If your background check vendor pulls a multi-state criminal history report, this is worth a direct conversation with them about how they're flagging and filtering results for San Francisco-based hiring.

A new response window before adverse action

The ordinance also tightens the procedure employers must follow before rescinding an offer. If a candidate or employee submits information in response to a pre-adverse action notice — explaining the context of a conviction, disputing a record's accuracy, or providing evidence of rehabilitation — and does so within seven days, the employer now must:

• Confirm receipt of that information within 14 days
• Delay any final adverse action for a reasonable period
• Reconsider the decision in light of what was submitted

This isn't a courtesy anymore — it's a documented step in the process, and failing to follow it is itself a violation.

The fines just about doubled

Penalties under the FCO are enforced per violation, and as of August 10 they look like this:

• First violation: $1,000, up from $500
• Second violation: $2,000, up from $1,000
• Third and subsequent violations: $4,000, up from $2,000

Because these penalties apply per violation rather than per case, a business that mishandles background checks across several hires in a short window could see the fines stack up quickly. A single hiring cycle that touches multiple candidates — each one a separate potential violation — is where this can turn into a real liability line item rather than a one-time slap on the wrist.

Who actually has to comply

The threshold is five or more employees, and the ordinance applies based on where the business is located or does business — not just where the specific job is based. That catches a lot of small operations that might not think of themselves as "San Francisco employers" in the traditional sense: a business headquartered elsewhere with a single San Francisco location, a professional services firm with a handful of remote workers who happen to be based in the city, or a growing company that just crossed the five-employee mark.

If you're unsure whether your headcount and footprint put you inside the ordinance's reach, that's worth confirming before your next hire, not after a complaint is filed. Getting your entity structure and employee classifications clear from the start — something covered in our guide to LLC formation — makes it easier to answer questions like this quickly.

What small business owners should do now

Audit your application and interview process

Pull your current job application and confirm there's no criminal history question anywhere on it. Review your standard interview questions and any screening scripts used by hiring managers to make sure conviction or arrest history never comes up before a conditional offer is extended.

Talk to your background check vendor

Ask specifically how your vendor handles out-of-state records tied to conduct that's legal in California. If they can't answer clearly, that's a gap you're inheriting as the employer of record, not them.

Build the response window into your process

Update your adverse action templates and internal timeline so that a candidate's response to a pre-adverse action notice automatically triggers the 14-day confirmation and a documented reconsideration step. This is easiest to do before you need it, not while a candidate's file is sitting on someone's desk.

Train whoever does your hiring

If you're a small operation, this might just be you or one manager. Either way, make sure whoever extends offers and runs background checks understands the new rules — the fines apply regardless of whether a violation was intentional.

Revisit your insurance coverage

Employment practices liability coverage varies by policy, and it's worth checking whether yours accounts for regulatory penalties tied to hiring practices. Our guide to business insurance walks through what's typically covered and what isn't.

The bigger picture

San Francisco isn't alone in tightening fair chance hiring rules, and other cities have shown a pattern of increasing penalties once the initial ordinance has been in place for a while. If your business operates in multiple jurisdictions, it's worth treating this as a prompt to check whether Los Angeles, Oakland, or other California cities where you hire have their own — potentially different — fair chance requirements, rather than assuming one compliant process covers all of them.

For a five-person shop making a handful of hires a year, the cost of getting this wrong just became more painful. The fix, though, isn't complicated: keep criminal history questions out of the application and interview, follow the notice-and-response timeline to the letter, and make sure your background check vendor is filtering the way San Francisco now requires.

Photo by Eric Prouzet on Unsplash