Can My California Employer Check My Credit?

In previous years, it was common for employers throughout the United States to check a job applicant’s credit to help make employment decisions. If applicants had poor credit, the potential employer would often see that as a sign of irresponsibility and decide not to hire that person. However, in recent years, with the economic downturn, more Americans than ever have credit problems. Unemployment, mortgage foreclosures, and other financial struggles have made it difficult for people to pay all of their bills and have caused a large number of credit scores to plummet. Those lower credit scores have made it difficult for some Americans to secure employment, which only furthers their financial difficulties.

Recent reports, however, have indicated that a low credit score has little to no reflection on whether an applicant has the ability to adequately perform job duties. For that reason, in December of 2013, Senator Elizabeth Warren (D-Mass.) introduced proposed federal legislation, the Equal Employment for All Act, which would amend the Fair Credit Reporting Act (FRCA) to prohibit employers across the United States from using credit information to make employment decisions, all in order to protect applicants and employees from unjust discrimination.

California Credit Check Laws

While the federal legislation is still pending, California job applicants and employees are already protected from discrimination based on credit checks. California is one of ten states that have enacted such legislative protections for employees as of January 1st, 2014. These states include California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington. Additionally, 35 other states have pending legislation related to employer credit checks.

Generally, most California public and private employers may not use credit information as the basis for any adverse employment action, such as hiring, demotion, rejection for promotion, or termination. An employer may not otherwise discriminate against or harass an employer based on credit information.

Exceptions to the Law

There are certain exceptions in which an employer may use credit information as the basis of an employment decision. Such exceptions are necessary in fields of employment that involve the handling of money or certain financial responsibilities. Some exceptions include applicants for:

·         A managerial position who qualifies for the executive exemption from wage and hour laws;

·         A position that allows the employee to transfer company money, enter into financial contracts for the company, or be a signatory on the company’s credit cards or bank accounts;

·         A position that gives the employee access to large amounts of credit or bank applications or other personal information of customers;

·         A position that gives the employee access to trade secrets or other confidential company information;

·         A position in which the employee handles large amounts of client money.

It makes sense that credit checks would be allowed for such positions that require a large amount of trust or financial responsibility. However, for any other type of position, California employers should never use credit information to make decisions or to discriminate against an applicant or employee.

If you have any concerns about employer credit checks, or if you believe that a company has violated employment laws, contact the office of Pershing Square Law Firm today for assistance in protecting your rights.