California Moves to Ban Employment Credit Reports Again . . . And Again

Nick Fishman

California Assemblyman Tony Mendoza hopes that the third time is a charm for his efforts to ban the use of employment credit reports in the state.  Both of his previous efforts were actually passed into law before being vetoed by former governor Arnold Schwarzenegger. According to Mendoza, “A credit report is an unfair lens through which to view job applicants. Preventing someone from becoming gainfully employed due to a poor credit history is shameful,” says Mendoza. “This bill will simply remove an unnecessary barrier to employment for those seeking everyday work opportunities.”

At the time of the second veto, the governor was said, “This bill is similar to legislation I have vetoed for the last two years on the basis that California’s employers and businesses have inherent needs to obtain information about applicants for employment and existing law already provides protections for employees from improper use of credit reports. As with the last two bills, this measure would also significantly increase the exposure for potential litigation over the use of credit checks.  For these reasons, I am unable to sign this bill.”

The current bill, AB 22 makes the use of a credit report or credit history as a qualification of employment unless the following criteria is met:

(1) The information contained in the report is substantially job-related, meaning that the position of the person for whom the report is sought has access to money, other assets, or confidential information.

(2) The position of the person for whom the report is sought is any of the following: (A) A managerial position. (B) A position in the state Department of Justice. (C) That of a sworn peace officer or other law enforcement position. (D) A position for which the information contained in the report is required to be disclosed by law or to be obtained by the employer.

They define a managerial position as “a position held by a person who has authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of this authority is not of a merely routine or clerical nature, but requires the use of independent judgment.”

So, at least there are exemptions here.  If passed, California would join Washington, Hawaii, Maryland, Illinois and Oregon as the only states with limitations on the use of credit reports as part of the background screening process.

Nick Fishman
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Nick Fishman

Nick Fishman is the co-founder of EmployeeScreenIQ, a leading, global employment background screening provider, and serves as the company’s executive vice president and chief marketing officer. He pioneered the creation of EmployeeScreen University, the #1 educational resource on employment background checks for human resources, security and risk management professionals. A recognized industry expert, Nick is a frequent author, presenter and contributor to the news media. Nick is also a licensed private investigator in the states of Ohio and Texas.
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  • Even with these exceptions, there are still problems with this bill. Often times, it is clerical workers who are handling credit card and other financial transactions. Even the wait staff at a restaurant is handling credit cards and could be stealing numbers.

    There are many service businesses where their clients require that everyone within the business be screened, including credit checks. If California bans them for all but managerial staff and higher, that will likely put California firms at a disadvantage in seeking those opportunities.

  • Nick Fishman

    Totally agree Michael. This is nothing but a populist issue. While employers do use credit reports on some applicants, the information found is weighed against a number of other factors.

  • Name Dave

    Just because someone’s income vanished and they couldn’t keep up the gym membership or the credit card bill doesn’t mean they are going to steal from an employer. This leap by employee screeners needs to be examined, and yes – job candidates deserve personal privacy, plus a chance to explain their circumstances to an employer in an interview.

  • Jody

    This is absolutely ridiculous to do a credit check for a job. Seriously?
    What does your personal finances have to do with your employment.

    Someone will steal just because they are struggling? Should we not walk down the street because we might get robbed? Should we not drive a car because we might get hit by a car?

    The way the economy is these days wonderful honest people are getting shut out of Job they are qualified for because they were laid off and they choose to feed their kids than pay the credit card on time for the moment