New California Law: Employee Credit Report


New California law on employers using credit reportsThe recent deadline for California Governor Jerry Brown to pass or veto the bills on his desk resulted in a long list of new laws passed in California.

Like we don’t have enough right?

In an effort to share the legal updates without totally overwhelming you, I will try to post one new law a day for the next week or two so check back daily.

We’ll start with requesting an employee credit report today.

Assembly Bill 22 prohibits an employer or prospective employer, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes unless the position of the person for whom the report is sought is:

(1) a position in the state Department of Justice,

(2) a managerial position,

(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 to specified personal information for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment,

(6) a position in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf,

(7) a position that involves access to confidential or proprietary information, or

(8) a position that involves regular access to $10,000 or more of cash, as specified.

Additionally, the law requires written notice to the person for whom a consumer credit report is sought for employment purposes of the specific reason for obtaining the report.

A consumer who suffers damages resulting from a violation of these state law provisions may bring a court action to recover monetary damages, as specified, but no person is liable for the violation if he or she shows reasonable procedures were maintained to assure compliance with the provisions, as specified.

This changes present California laws that allow an employer to request a credit report for employment purposes so long as he or she provides prior written notice of the request to the person for whom the report is sought.  Thus, beginning January 1, 2012, employers may request employee credit reports where there is a close relation between the information sought and the employee’s position.

TIPS:  Employers who currently use credit reports as part of the hiring process would be wise to evaluate your policies and practices in this area.  Specifically, identify the positions for which consumer credit reports are used and whether they fall within the parameters of the new law.

If you have questions regarding this or any other recently enacted California laws, feel free to contact us or call 949.529.0007.

In: Employment Law, New Laws

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