General Information

Assembly Bill 22, passed and signed by California's Governor in October 2011 significantly changes the use of credit reports for employment purposes in the Golden State.  The bill prohibits employers from using credit reports for employment purposes unless the report is used for one of the restrictive purposes as enumerated in 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:

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.

Compliance

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.  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.

Employers in other states who hire employees to work in California should seek legal advice as to how the new restriction affects them.

Newest of Seven States to Limit the Use of Credit Report for Employment Purposes

California  joins Washington, Oregon, Hawaii, Illinois, Maryland, and Connecticut as the seventh state to enact legislation restricting employers’ use of credit reports.  Similar legislation is pending in other states.