By Jack Schaedel & Alexandra M. Steinberg -
Today, October 10, 2011, California enacted AB 22, amending portions of the Civil Code and the Labor Code. The new law severely restricts an employer’s ability to obtain credit reports for an employee or applicant. The law now prohibits most employers from obtaining a credit report unless the employee or applicant’s position is/would fall under one of eight narrowly-defined exceptions, described briefly below. Further, before a credit report can be obtained even for these positions, an employer must first inform the person of the specific reason for obtaining the report. An employer who violates these laws may be sued for monetary damages; however, an employer who can show reasonable procedures were maintained to assure compliance with the provisions is not liable.
In California, an employer may obtain a credit report only for the following employees or prospective employees:
(1) A managerial position (as written, the law appears to limit this exception to employers in the professional, technical, clerical, mechanical and similar occupations);
(2) A position in the state Department of Justice;
(3) A sworn peace officer or other law enforcement position;
(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, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to all of the following types of information of any one person:
(A) Bank or credit card account information.
(B) Social security number.
(C) Date of birth.
(6) A position in which the person is, or would be, any of the following:
(A) A named signatory on the bank or credit card account of the employer.
(B) Authorized to transfer money on behalf of the employer.
(C) Authorized to enter into financial contracts on behalf of the employer.
(7) A position that involves access to confidential or proprietary information (trade secrets), with specific requirements.
(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.
California is not alone in this movement. Washington, Oregon, Hawaii, and Illinois already have laws limiting the use of credit reports in employment, while 13 additional states are considering similar legislation.
The text of the new statute is available online here.
