In a move that impacts employers in the Golden State conducting credit report checks on job applicants, California Governor Jerry Brown has signed into law Assembly Bill 22 (AB 22) which prohibits employers or prospective employers – with the exception of certain financial institutions – from obtaining consumer credit reports for employment purposes. When the new law takes effect January 1, 2012, California will join Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington as U.S. states currently restricting the use of credit checks by employers for employment decisions.
Introduced by Assembly Member Tony Mendoza (D-56th District), AB 22 amends Section 1785.20.5 of the Civil Code and adds Chapter 3.6 (commencing with Section 1024.5) to Part 2 of Division 2 of the Labor Code, relating to employment. The bill prohibits employers from obtaining a consumer credit reports unless the job position of the person for whom the report is sought is one of the following:
- A position in the state Department of Justice,
- A managerial position,
- A sworn peace officer or other law enforcement position,
- A position for which the information contained in the report is required by law to be disclosed or obtained,
- 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,
- 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,
- A position that involves access to confidential or proprietary information, or
- A position that involves regular access to $10,000 or more of cash.
In addition, AB 22 also requires the written notice informing the person for whom a consumer credit report is sought for employment purposes to also inform the person of the specific reason for obtaining the report. Under AB 22:
SECTION 1. Section 1785.20.5 of the Civil Code is amended to read:
(a) Prior to requesting a consumer credit report for employment purposes, the user of the report shall provide written notice to the person involved. The notice shall inform the person that a report will be used, and shall identify the specific basis under subdivision (a) of Section 1024.5 of the Labor Code for use of the report. The notice shall also inform the person of the source of the report, and shall contain a box that the person may check off to receive a copy of the credit report. If the consumer indicates that he or she wishes to receive a copy of the report, the user shall request that a copy be provided to the person when the user requests its copy from the credit reporting agency. The report to the user and to the subject person shall be provided contemporaneously and at no charge to the subject person.
(b) Whenever employment involving a consumer is denied either wholly or partly because of information contained in a consumer credit report from a consumer credit reporting agency, the user of the consumer credit report shall so advise the consumer against whom the adverse action has been taken and supply the name and address or addresses of the consumer credit reporting agency making the report. No person shall be held liable for any violation of this section if he or she shows by a preponderance of the evidence that, at the time of the alleged violation, he or she maintained reasonable procedures to assure compliance with this section.
SEC. 2. Chapter 3.6 (commencing with Section 1024.5) is added to Part 2 of Division 2 of the Labor Code, to read:
Chapter 3.6. Employer Use of Consumer Credit Reports
(a) An employer or prospective employer shall not use a consumer credit report for employment purposes unless the following criteria are satisfied:
(1) A managerial position.
(2) A position in the state Department of Justice.
(3) That of 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, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may obtain economic value from the disclosure or use of the information, and (ii) is the subject of an effort that is reasonable under the circumstances to maintain secrecy of the information.
(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.
(b) This section does not apply to a person or business subject to Sections 6801 to 6809, inclusive, of Title 15 of the United States Code and state and federal statutes or regulations implementing those sections if the person or business is subject to compliance oversight by a state or federal regulatory agency with respect to those laws.
(c) The following definitions apply to this section:
(1) “Consumer credit report” has the same meaning as defined in subdivision (c) of Section 1785.3 of the Civil Code, but does not include a report that (A) verifies income or employment, and (B) does not include credit-related information, such as credit history, credit score, or credit record. (2) “Managerial position” means an employee covered by the executive exemption set forth in subparagraph (1) of paragraph (A) of Section 1 of Wage Order 4 of the Industrial Welfare Commission (8 Cal. Code Regs. 11040).
To read the final version of California Assembly Bill 22 (AB 22), click here.