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California Legislature Passes AB 22 to Limit Use of Pre-Employment Credit Reports

  September 19, 2011

Earlier this month, California's legislature passed AB22, a bill that would ban employers from using credit reports in hiring decisions. Of course, there are a few exceptions to the measure. Similar laws have already been enacted in Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington. Other states have also introduced some form of credit report legislation.

This is California Assembly Member Tony Mendoza's third attempt at passing this legislation. Former California Governor Arnold Schwarzenegger (R) vetoed related measures back in 2009 and 2010. The bill now goes to current Governor Jerry Brown (D) for his consideration on whether the bill should be signed into law.

“A credit report is not a good indicator of a person's trustworthiness or work ethic,” says Assembly Member Mendoza. “Many Californians are still experiencing financial hardships from the economic downturn including layoffs, increasing unemployment rates, and the continuing foreclosure crisis. All of these things make it harder for people to pay their bills.”

AB 22 would prohibit an employer from using pre-employment credit reports for hiring purposes, unless the information falls under the following exceptions:

  • All managers, named signatories, anyone with access to trade secrets
  • Access to $10,000 more in case during a workday
  • Any position with the State Department of Justice
  • A sworn police officer or other law enforcement job
  • Any position for which information in the credit report is required to be disclosed by law or be obtained by an employer
  • Anyone who works with information that can be used to commit identity theft

In summary, should AB 22 become law, employers will be able to obtain credit reports only if the information is substantially job-related and/or relates to a managerial or other sensitive position. Further, if there is an exception, the employer must inform the prospective employee of the reason a credit report is being obtained.

Click here to view the proposed legislation.

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