New Restrictions On Use Of Credit Reports For Background Checks10.13.2011
On October 8, 2011, Governor Brown signed AB 22 into law. Prior to AB 22’s enactment, California law allowed any employer to request a credit report for employment purposes as long as the employer provided written notice to the person in question and allowed the person to obtain a copy of the report. In addition, if an adverse employment action was taken based on the results of the credit report (i.e. the person was not hired or terminated), then the employer was required to disclose that the adverse employment action was based on the results of the report and divulge the contact information for the consumer credit agency that compiled the report. Previous versions of the bill were vetoed by former California Governor Arnold Schwarzenegger.
Following existing legislation enacted in Connecticut, Hawaii, Illinois, Maryland, and Oregon, AB 22 significantly limits the instances in which employers may utilize credit reports for employment purposes. With exception to certain financial institutions, employers are prohibited from obtaining the credit report of a person unless the job position of the person for whom the report is sought falls under any of the following categories:
Furthermore, AB 22 requires that the written notice to the person also identify which of the above reasons the employer is relying upon in requesting a credit report.
Critics of AB 22 fear that the new law restricts information that can be used by employers to weed out potentially problematic or dangerous employees, while proponents argue that AB 22 is designed to put the unemployed, who are typically in a financially weakened state, back to work. Regardless of the merits this new legislation, it is evident that employers will now have one less tool available to research and assess applicants and employees.
View Attachment (PDF)