Use of credit reports for employment screening purposes

Several states have passed laws limiting credit reports for employment decisions with provisions that require a nexus to actual job duties. Those states are: Washington, Oregon, Hawaii, Illinois, Maryland, Vermont, Connecticut, and California.  A Colorado law will become effective on July 1, 2013. Similar laws have been introduced in other states.

A California employer cannot review your credit report unless the job falls into one of numerous exceptions. Credit checks are allowed for, among other things, jobs with the state Department of Justice, management positons, law enforcement jobs, and jobs that entail access to money, financial accounts, or personal information. For full details on Assembly Bill 22 regarding credit checks and employment reports in California, see http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/ab_22_bill_20110920_enrolled.html.

Read more at : https://www.privacyrights.org/fs/fs16-bck.htm

What Is Included in a Background Check?

Background reports can range from a verification of an applicant's Social Security number to a detailed account of the potential employee's history and acquaintances. Some employers are now searching popular social networking sites such as and Facebook for the profiles of applicants. 

Here are some of the pieces of information that might be included in a background check. Note that many of these sources are public records created by government agencies.

• Driving records
• Vehicle registration
• Credit records
• Criminal records
• Social Security no.
• Education records
• Court records
• Workers' compensation
• Bankruptcy
• Character references
• Neighbor interviews
• Medical records
• Property ownership
• Military records
• State licensing records
• Drug test records
• Past employers
• Personal references
• Incarceration records
• Sex offender lists

Information to be included in a background check will almost certainly depend to some extent on the employer and the job involved. For many jobs, a state or federal law requires the employer to conduct a background check. Jobs that involve work with children, the elderly or people with disabilities are examples of jobs that will almost certainly require a criminal background check.

Laws on Background Checks

• Federal Fair Credit Reporting Act, 15 USC §1681,www.ftc.gov/os/statutes/fcradoc.pdf
• California Investigative Consumer Reporting Agencies Act, California Civil Code §1786, www.leginfo.ca.gov
• California Consumer Credit Reporting Agencies Act, California Civil Code §1785
  www.leginfo.ca.gov

California

In 2012 California became the seventh state to address the use of credit reports for employment background screening purposes. California Governor Jerry Brown signed Assembly Bill 22 (AB 22) which restricts when employers lawfully can use “consumer credit reports.” AB 22 is effective as of January 1, 2012.

Credit Report Restrictions

The new law limits when private and public sector employers can use consumer credit reports for employment screening purposes.

Specifically, employers will be permitted to use consumer credit reports only if the individual is applying for or works (or will work) in one of the excluded positions, including as a bona fide manager or that affords regular access to large amounts of cash or sensitive information (e.g., trade secrets). There is a limited exception for certain employers such as financial institutions.

Credit Report Notifications

Before an employer orders a consumer credit report from a “consumer reporting agency” (such as HireRight) for employment purposes, the statute requires the employer to comply with notice requirements. The employer must notify the applicant/employee in writing which type of position the applicant or employee is being considered for that allows the employer to obtain a consumer credit report.

Then, after receiving the consumer credit report, if the employer rejects the applicant/employee based in whole or in part on the information in it, the employer must notify the applicant/employee and provide the name and address of the consumer credit reporting agency that provided the report.

The Nationwide Trend

Former Gov. Schwarzenegger vetoed similar legislation in each of the past three years. In doing so, Gov. Schwarzenegger stated that California employers “have inherent needs to obtain information about applicants for employment” and that the bill would “significantly increase the exposure for potential litigation over the use of credit checks.”

But, California is hardly the first state to pass such legislation. Six other states have enacted similar credit reporting laws including Hawaii, Washington, Oregon, Illinois, Maryland and Connecticut.  Similar legislation has also been proposed and is still pending in the District of Columbia, Florida, Georgia, Michigan, Minnesota, Nebraska, New Jersey, New York, Ohio, Pennsylvania, South Carolina, and Vermont.

Federal legislation has also been proposed but has not gain much traction to date. Not all legislative efforts to pass similar bills in other states have succeeded. In 2011 alone, similar legislation failed in several states, including Alabama, Arkansas, Indiana, Kentucky, Missouri and Montana.