Employers, contractors and affordable housing providers will have limited use of criminal background checks in vetting workers or tenants under a new San Francisco ordinance signed by San Francisco Mayor Edwin Lee.

The Fair Chance Ordinance requires employers employing 20 or more workers regardless of location–including employment agencies, contractors, subcontractors and housing providers–to limit the use of criminal history information. An estimated one in four California adults has an arrest or conviction record, according to the ordinance.

Employers, housing providers and contractors, including construction contractors, are barred from asking or conducting a background check until the entity determines that the individual’s qualifications meet the requirements for the position or affordable housing unit. Conviction history may be obtained after the first live interview. Applications can’t include inquiries as to convictions, including those judicially dismissed, exonerated or committed while a juvenile.

Not covered under the ordinance are contracts worth less than $5,000 in a fiscal year and property contracts of less than 30 days’ duration. Only applicants and employees who would be or are performing work in furtherance of a contract within the city are covered.

The law doesn’t require an employer to give preference to or hire an unqualified person with an arrest or conviction record or a housing provider to rent to an unqualified tenant, stating: “this Article shall not be construed to limit an employer or housing provider’s ability to choose the most qualified and appropriate candidate from applicants for employment or housing.”

Under the ordinance, which was supported by the San Francisco Chamber of Commerce, the conviction must bear a direct relationship to the housing or position.

The employer or provider must consider whether the position or housing offers the opportunity for the same or a similar offense to occur. Applicants have the right to offer evidence about whether their conviction is inaccurate and offer evidence of rehabilitation and other mitigating factors. Arrests that do not lead to conviction can’t be considered in any manner.

Under the new ordinance, the first violation found during the initial year the ordinance is in effect will result in warnings and notices to correct. Second violations carry a $50 administrative penalty for each employee or applicant, increasing to $100 per employee or applicant violation for a second violation.

Where prompt correction is not forthcoming, the San Francisco Office of Labor Standards Enforcement may refer the matter to the city attorney for civil action.

Relief could include reinstatement, back pay, payment of benefits or salary unlawfully withheld, additional liquidated damages of $50 per employee whose rights were violated and appropriate injunctive relief.

The law goes into effect 30 days after signing and becomes operative in 180 days. (http://about.bloomberglaw.com/law-reports/san-francisco-enacts-law-limiting-use-of-criminal-background-checks/)