California Places Restrictions on Employers' Use of Credit Reports

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.

In addition to restricting the purposes under which employers can utilize credit reports, the new California law will require employers:

·         to give the subject of the report a written notice informing him or her that a credit report will be sought;  and

·         provide the specific reason under the statute for obtaining the report; and

·         provide a check box allowing the applicant to request a copy of the credit report at no charge.

Assembly Bill No. 22 was signed into law by Governor Brown on October 11, 2011. California is the seventh state to enact legislation limiting employers’ use of credit reports joining Washington, Oregon, Hawaii, Maryland, and Connecticut.  Similar legislation is pending in other states. 

Employment Screening Services, as well as the entire employment screening industry, is currently consulting with legal experts to clarify an efficient way to comply with the new California civil code. As always, ESS does not provide legal advice and we encourage all clients to review policy changes with their legal department.