This guest post was authored by Julie L. Strom
Effective January 1, 2012, AB 22 places new limitations on when an employer is allowed to use a consumer credit report as a basis for employment decisions, and imposes disclosure requirements on employers who use such reports. The new law specifically lists job positions where employers will still be permitted to use credit reports in conjunction with employment decisions.
Currently, California employers who obtain credit reports on job applicants or employees must provide prior written notice informing the applicant or employee of the use of the report, the source of the report, and the right of the applicant or employee to request a copy. Furthermore, if the employer bases an adverse decision on information in the report, the employer must tell the applicant or employee and provide them contact information for the credit agency issuing the report. It is important to note that a “consumer credit report” as defined in the new law does not include reports that merely verify prior income or employment without containing credit related information, and employers may still use those types of reports as part of their regular background check process.
AB 22 creates new Labor Code section 1024.5, which states that public and private sector employers, other than certain financial institutions, may only use consumer credit reports in connection with employment decisions if the job in question is:
- a managerial position (defined here as an employee who qualifies for the executive exemption from overtime pay under Industrial Welfare Commission Order 4
- a position in the State Department of Justice
- a sworn peace officer or law enforcement position
- a position for which the employer is legally required to consider credit history
- a position that affords regular access (besides routine processing and solicitation of credit card information in retail establishments) to all the following information of others: bank or credit card account information, Social Security number, date of birth
- a position in which the person is a named signatory on the bank or credit card information of the employer, is authorized to transfer funds on behalf of the employer, or is authorized to enter financial contracts on behalf of the employer
- a position that affords access to proprietary or confidential information
- a position that involves regular access to cash totaling more than $10,000 of the employer, a customer or client during the workday.
In addition to the disclosures already required, AB 22 amends Civil Code section 1785.20.5 by requiring an employer who requests a credit report from an applicant or employee to notify that individual which of the specific exceptions applies to him or her. The new law does not provide additional remedies for applicants or employees.
Employer Tips: Employers should determine which positions in their agency still allow use of credit reports in connection with employment decisions. They should also re-visit the notice forms they currently use to comply with notice and disclosure provisions and update them to include the new notice requirements.