California Joins Other States in Placing Restrictions on Employers’ Use of Credit Checks
On October 10, 2011, Governor Brown signed into legislation Assembly Bill No. 22, which generally prohibits employers from using an applicant’s or employee’s credit history in making employment decisions.
Prior to this legislation, employers could request a credit report for employment purposes if they provided prior written notice of the request to the person for whom the report was sought. Assembly Bill 22 significantly changes this landscape by prohibiting employers from using credit reports for employment purposes unless the report is used for one of the limited purposes enumerated by the statute.
Effective January 1, 2012, Employers in California may only use a consumer credit reports for employment purposes if the report is sought for one of the following:
If an employer procures a consumer report for one of the limited exceptions outlined in the statute, it must provide the person for whom the credit report is sought with written notice informing him or her that a report will be requested, the specific reasons for obtaining the report as provided in the statute, and a check box allowing the applicant to request a copy of the credit report at no charge.
California is the seventh state to enact legislation restricting employers’ use of credit reports joining Washington, Oregon, Hawaii, Illinois, Maryland, and Connecticut. Similar legislation is pending in several other states. Accordingly, employers who use credit information as part of employment screening or other hiring purposes should evaluate their policies in light of the recent momentum against using such information in employment decisions.
Pamela Devata is a partner in Seyfarth’s Chicago office and Jeffrey Sand is an associate in the firm’s Atlanta office. If you would like further information, please contact your Seyfarth Shaw LLP attorney, Pamela Devata at firstname.lastname@example.org or Jeffrey Sand at email@example.com.