California Joins Other States in Placing Restrictions on Employer 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.

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:

1. A managerial position;
2. A position in the state Department of Justice;
3. A sworn peace officer or other law enforcement;
4. A position for which the information contained in the report is required by law to be disclosed or obtained;
5. A position that involves regular access to confidential information such as credit card account information, Social security number, or Date of birth;
6. A position which the person can enter into financial transactions on behalf of the company;
7. A position that involves access to confidential or proprietary information; or
8. A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday.

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.