New California Law Prohibits Employers from Obtaining Credit Reports for Most Job Applicants and Employees

On October 10, 2011, Governor Brown signed into law AB 22, a bill that will greatly restrict the ability of employers to run credit reports on prospective and current employees.
The new law prohibits employers, 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 falls into one of the following categories:

•Position in the state Department of Justice
•Managerial position (as defined in the Industrial Welfare Commission’s Wage Order 4)
•Sworn peace officer or other law enforcement position
•Position for which the information contained in the report is required by law to be disclosed or obtained
•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
•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
•Position that involves access to confidential or proprietary information
•Position that involves regular access to $10,000 or more of cash
In the event that an employee or prospective employee can be categorized accordingly, the employer must provide written notice to the person for whom the consumer credit report is being sought.  In that written notice, the employer must also inform the person of the specific reasons for which the information is being requested.

If an employer later denies employment or promotion to a person based on the results of a legally authorized consumer credit check, the employer must inform the person about that decision and provide the person with the name and address information of the consumer credit reporting agency used by the employer.

The restrictions in this new law and the procedural requirements placed upon employers may be difficult for many employers to interpret.  Our firm can provide your company with assistance in implementing the requirements of this new law, and we can help your HR staff establish policies and procedures for the proper use of consumer credit reports.