10/11/2011 California Governor Bans Use of Employment Credit Reports

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It’s official. The state of California becomes the seventh state to prohibit employers from using credit reports to make employment decisions. California Governor Jerry Brown signed AB 22 which will take effect on January 1, 2012. Like it’s counterparts in the states of Maryland, Oregon, Hawaii, Illinois, Washington and Connecticut there are some exceptions. Employers may consider a credit report under the following circumstances only if the candidate is informed that a report will be sought and they have obtained written permission:

  • A managerial position
  • A position in the state Department of Justice
  • A sworn peace officer or other law enforcement
  • A position for which the information contained in the report is required by law to be disclosed or obtained
  • A position that involves regular access to confidential information such as credit card account information, Social security number, or Date of birth
  • A position which the person can enter into financial transactions on behalf of the company
  • A position that involves access to confidential or proprietary information
  • 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

On a personal level, everyone saw this coming. Former Governor Arnold Schwarzenegger vetoed similar measures during his tenure on two occasions. And the rising tide of similar legislation in other states only bolstered the state assembly’s efforts to make this happen.

While I was once opposed to this type of legislation, I have slowly warmed to the concept. The truth is that employers that do not use credit reports for the exempted purposes probably shouldn’t have been using them to make hiring decisions in the first place.

Any employer that operates in the state of California and utilizes credit reports or might do so in the future should consider evaluating their employment screening policies.

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