diff --git a/apps/api/src/people/dto/update-people.dto.ts b/apps/api/src/people/dto/update-people.dto.ts
index 951118b401..8987919ea8 100644
--- a/apps/api/src/people/dto/update-people.dto.ts
+++ b/apps/api/src/people/dto/update-people.dto.ts
@@ -5,6 +5,7 @@ import {
   IsString,
   IsEmail,
   IsDateString,
+  MaxLength,
 } from 'class-validator';
 import { CreatePeopleDto } from './create-people.dto';
 
@@ -54,4 +55,26 @@ export class UpdatePeopleDto extends PartialType(CreatePeopleDto) {
   @IsOptional()
   @IsBoolean()
   backgroundCheckExempt?: boolean;
+
+  @ApiProperty({
+    description:
+      'Reason code for the exemption (e.g. "contractor_with_vendor_check", "other"). Persisted alongside backgroundCheckExempt and cleared when the member becomes non-exempt.',
+    example: 'other',
+    required: false,
+  })
+  @IsOptional()
+  @IsString()
+  @MaxLength(100)
+  backgroundCheckExemptReason?: string;
+
+  @ApiProperty({
+    description:
+      'Free-text justification for the exemption, attached to the audit log. Cleared when the member becomes non-exempt.',
+    example: 'Contractor with existing background check on file from staffing agency.',
+    required: false,
+  })
+  @IsOptional()
+  @IsString()
+  @MaxLength(2000)
+  backgroundCheckExemptJustification?: string;
 }
diff --git a/apps/api/src/people/utils/member-queries.spec.ts b/apps/api/src/people/utils/member-queries.spec.ts
new file mode 100644
index 0000000000..90f53ba7a3
--- /dev/null
+++ b/apps/api/src/people/utils/member-queries.spec.ts
@@ -0,0 +1,90 @@
+import { MemberQueries } from './member-queries';
+
+jest.mock('@db', () => ({
+  db: {
+    member: {
+      update: jest.fn(),
+    },
+    user: {
+      update: jest.fn(),
+    },
+  },
+}));
+
+import { db } from '@db';
+
+const mockedDb = db as jest.Mocked<typeof db>;
+
+describe('MemberQueries.updateMember — background-check exemption fields', () => {
+  beforeEach(() => {
+    jest.clearAllMocks();
+    (mockedDb.member.update as jest.Mock).mockResolvedValue({ id: 'mem_1' });
+  });
+
+  it('persists reason and justification when backgroundCheckExempt is true', async () => {
+    await MemberQueries.updateMember('mem_1', 'org_1', {
+      backgroundCheckExempt: true,
+      backgroundCheckExemptReason: 'other',
+      backgroundCheckExemptJustification: 'Founder',
+    });
+
+    expect(mockedDb.member.update).toHaveBeenCalledTimes(1);
+    expect(mockedDb.member.update).toHaveBeenCalledWith(
+      expect.objectContaining({
+        where: { id: 'mem_1', organizationId: 'org_1' },
+        data: expect.objectContaining({
+          backgroundCheckExempt: true,
+          backgroundCheckExemptReason: 'other',
+          backgroundCheckExemptJustification: 'Founder',
+        }),
+      }),
+    );
+  });
+
+  it('clears reason and justification when backgroundCheckExempt is set to false', async () => {
+    await MemberQueries.updateMember('mem_1', 'org_1', {
+      backgroundCheckExempt: false,
+    });
+
+    expect(mockedDb.member.update).toHaveBeenCalledWith(
+      expect.objectContaining({
+        data: expect.objectContaining({
+          backgroundCheckExempt: false,
+          backgroundCheckExemptReason: null,
+          backgroundCheckExemptJustification: null,
+        }),
+      }),
+    );
+  });
+
+  it('overrides incoming reason/justification when un-exempting', async () => {
+    // Defensive: if a client sends contradictory data, false wins —
+    // an un-exempt request must not retain stale reason text.
+    await MemberQueries.updateMember('mem_1', 'org_1', {
+      backgroundCheckExempt: false,
+      backgroundCheckExemptReason: 'stale_reason',
+      backgroundCheckExemptJustification: 'stale text',
+    });
+
+    expect(mockedDb.member.update).toHaveBeenCalledWith(
+      expect.objectContaining({
+        data: expect.objectContaining({
+          backgroundCheckExempt: false,
+          backgroundCheckExemptReason: null,
+          backgroundCheckExemptJustification: null,
+        }),
+      }),
+    );
+  });
+
+  it('does not touch reason or justification when the patch omits backgroundCheckExempt', async () => {
+    await MemberQueries.updateMember('mem_1', 'org_1', {
+      jobTitle: 'Engineer',
+    });
+
+    expect(mockedDb.member.update).toHaveBeenCalledTimes(1);
+    const call = (mockedDb.member.update as jest.Mock).mock.calls[0][0];
+    expect(call.data).not.toHaveProperty('backgroundCheckExemptReason');
+    expect(call.data).not.toHaveProperty('backgroundCheckExemptJustification');
+  });
+});
diff --git a/apps/api/src/people/utils/member-queries.ts b/apps/api/src/people/utils/member-queries.ts
index 05ced2524c..da7ecc92fa 100644
--- a/apps/api/src/people/utils/member-queries.ts
+++ b/apps/api/src/people/utils/member-queries.ts
@@ -21,6 +21,8 @@ export class MemberQueries {
     isActive: true,
     deactivated: true,
     backgroundCheckExempt: true,
+    backgroundCheckExemptReason: true,
+    backgroundCheckExemptJustification: true,
     fleetDmLabelId: true,
     user: {
       select: {
@@ -128,6 +130,14 @@ export class MemberQueries {
       updatePayload.fleetDmLabelId = null;
     }
 
+    // Un-exempting clears reason + justification so a future re-exemption
+    // starts from a clean state. The audit log retains the prior values
+    // from the original exempt-true request.
+    if (updatePayload.backgroundCheckExempt === false) {
+      updatePayload.backgroundCheckExemptReason = null;
+      updatePayload.backgroundCheckExemptJustification = null;
+    }
+
     const hasUserUpdates = name !== undefined || email !== undefined;
     const hasMemberUpdates = Object.keys(updatePayload).length > 0;
 
diff --git a/apps/app/src/test-utils/mocks/auth.ts b/apps/app/src/test-utils/mocks/auth.ts
index 135b192afc..0a3a89c5d4 100644
--- a/apps/app/src/test-utils/mocks/auth.ts
+++ b/apps/app/src/test-utils/mocks/auth.ts
@@ -83,6 +83,8 @@ export const createMockMember = (overrides?: Partial<Member>): Member => ({
   externalUserId: null,
   externalUserSource: null,
   backgroundCheckExempt: false,
+  backgroundCheckExemptReason: null,
+  backgroundCheckExemptJustification: null,
   ...overrides,
 });
 
diff --git a/packages/db/prisma/migrations/20260515221108_add_background_check_exemption_reason_justification/migration.sql b/packages/db/prisma/migrations/20260515221108_add_background_check_exemption_reason_justification/migration.sql
new file mode 100644
index 0000000000..a1f9e91e38
--- /dev/null
+++ b/packages/db/prisma/migrations/20260515221108_add_background_check_exemption_reason_justification/migration.sql
@@ -0,0 +1,3 @@
+-- AlterTable
+ALTER TABLE "Member" ADD COLUMN     "backgroundCheckExemptJustification" TEXT,
+ADD COLUMN     "backgroundCheckExemptReason" TEXT;
diff --git a/packages/db/prisma/schema/auth.prisma b/packages/db/prisma/schema/auth.prisma
index 801083b868..956015bd93 100644
--- a/packages/db/prisma/schema/auth.prisma
+++ b/packages/db/prisma/schema/auth.prisma
@@ -119,6 +119,8 @@ model Member {
   isActive                        Boolean                           @default(true)
   deactivated                     Boolean                           @default(false)
   backgroundCheckExempt           Boolean                           @default(false)
+  backgroundCheckExemptReason     String?
+  backgroundCheckExemptJustification String?                        @db.Text
   externalUserId                  String?
   externalUserSource              String?
   employeeTrainingVideoCompletion EmployeeTrainingVideoCompletion[]