BACKGROUND CHECKS (CALIFORNIA)–Employer Use of Credit Reports Restricted

In addition to other restrictions and procedures required under federal and state law with regard to background checks, as of January 1, 2012 specific requirements must be met for an employer to obtain a consumer credit report which includes credit-related information such as credit history, credit score or credit record on a prospective or current employee.

An employer, with the exception of certain financial institutions, may not obtain or use such a report unless the position for which the report is sought is one of the following:

– A position in the state Department of Justice;

– A managerial position, defined as an employee covered by the executive exemption in the IWC Wage Order 4;

– A sworn peace officer or other law enforcement position

– A position for which the information is required by law to be disclosed or obtained;

– A position that involves regular access to personal information (bank or credit card account information; social security number; date of birth), other than routine solicitation and processing of credit card applications in a retail establishment;

– A position in which the person would be a named signatory on the bank or credit card account of the employer, or authorized to transfer money or enter into financial contracts on behalf of the employer;

– A position that involves access to confidential or proprietary information; or

– A position that involves regular access to cash of $10,000 or more

If a credit report is to be obtained for an individual in, or applying for, one of these types of positions that person must be advised, in writing, of the specific basis (as enumerated above) for use of the report.

What this means for you

Many employers have begun routinely obtaining far-reaching background checks that cover criminal, credit and personal histories of the individual. With this legislation, employers will need to carefully consider whether learning the credit worthiness of an individual is appropriate based on the position involved. Generally, this will only be lawful for positions involving significant managerial authority or access to personal or company confidential information (e.g., executives or HR managers); access to or authority over the funds and finances of the company (e.g., treasurers, certain financial officers or accountants); or law enforcement positions.