California is the next state that may be restricting the use of credit reports for employment background checks. Assemblyman Tony Mendoza introduced AB 22 which has passed the assembly and is now headed to the senate. Previous attempts to pass this into law have failed. Mendoza hopes this time will be different under Governor Jerry Brown as former Governor Arnold Schwarzenegger vetoed two prior attempts to pass this bill into law.
“A credit report is not a good indicator of a person’s trustworthiness or work ethic,” says Assembly member Mendoza. “Many Californians are still experiencing financial hardships from the economic downturn including layoffs, increasing unemployment rates, and the continuing foreclosure crisis. All of these things make it harder for people to pay their bills.” Says Mendoza.
There is certainly a lot of debate as to whether a credit report is a good measure of an individual’s character and trustworthiness. Many employers use this information as part of the pre-employment screening process and at this time, it’s legal in the majority of states. Currently there are five states that restrict the use of credit reports (Washington, Illinois, Oregon, Maryland, and Hawaii)
Although AB 22 would ban the use of credit reports in hiring decisions, some exceptions would exist. Exemptions would include: a managerial position which has access to cash and assets or confidential information. Any position with the Department of Justice; a law enforcement officer and any position where information contained in the report is required to be disclosed by law or be obtained by the employer.
There would be significant wiggle room for employers when hiring management positions. Confidential information can be defined in many ways. Webster’s Dictionary defines confidential as; marked by intimacy, private, secret, entrusted with confidences, and containing information whose unauthorized disclosure could be prejudicial to national security.
However this bill plays out, keeping abreast of the ever- changing background screening laws is critical to any organization to ensure FCRA and State compliance. There could be serious consequences for selecting a vendor that is not well acquainted with both Federal and State employment background check laws.