6/13/2012 Vermont Prohibits the Use of Employment Credit Reports

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We have just learned that the state of Vermont has become the eighth state to prohibit employers from using credit reports to make employment decisions effective July 1, 2012. Like it’s counterparts in the states of California, Maryland, Oregon, Hawaii, Illinois, Washington and Connecticut there are some exceptions. According to our friend (and counsel), Pam Devata at Seyfarth Shaw, 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:

  • The information is required by state or federal law or regulation;
  • The position of employment:
    • involves access to “confidential financial information,” defined as sensitive financial information of commercial value that consumers or clients explicitly authorize the employer to have and which the employer only entrusts to certain employees;
    • is that of a law enforcement officer, emergency medical personnel or a firefighter (as these terms are defined by state law);
    • requires a financial fiduciary responsibility to the employer or its clients, including authority to issue payments, collect debts, transfer money, or enter into contracts; or involves access to employer’s payroll information.
  • The employer is a financial institution or credit union (as these terms are defined by state law); or
  • The employer can demonstrate that the information is “valid and reliable predictor of employee performance in a specific position of employment.”

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 Vermont and utilizes credit reports or might do so in the future should consider evaluating their employment screening policies.

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