Under a new law that took effect on January 1, 2012, most employers or prospective employers in California, with the exception of certain financial institutions, may no longer obtain a consumer credit report when hiring or evaluating employees. The new law, Assembly Bill 22, was authored by Assemblymember Tony Mendoza and signed into law by Governor Jerry Brown on October 10, 2011.
Prior to the enactment of AB 22, an employer could request a credit report for employment purposes so long as he or she provided prior written notice of the request to the person for whom the report was sought. In the event an adverse employment decisions was based on information contained in a consumer report, the law required the employer to so advise that employee or potential employee and provide the name and address of the reporting consumer credit agency.
AB 22 amends section 1785.20.5 of the Civil Code and adds a section 1024.5 to the Labor Code to prohibit an employer or prospective employer, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes. Assemblymember Mendoza views the new law as good news for many long-term unemployed individuals whose credit score has suffered due to their unemployment. It may be difficult for someone whose credit score has dropped due to an inability to be hired when the employer is using the prospective employee’s credit report as a factor in making a hiring decision. Assemblymember Mendoza believes this legislation will improve this “catch 22.”
There are certain exceptions to the new law. Employers may obtain consumer credit reports for employment purposes for the following: any position with the State Department of Justice; a sworn peace officer or other law enforcement position; any position for which the information contained in the report is required to be disclosed by law or to be obtained by the employer. Also exempted are managers, named signatories, anyone with access to trade secrets, access to $10,000 or more in cash during the workday, and anyone who regularly works with information that can be used to commit identity theft.
AB 22 also requires employers who are authorized to obtain consumer credit reports to inform the person for whom the report is sought the specific reason for obtaining the report.
The passage of AB 22 was Assemblymember Mendoza’s third attempt at similar legislation. AB 482 (2010) and AB 943 (2009) were both vetoed by then Governor Arnold Schwarzenegger.
If you have any questions about this law, Carmel & Naccasha has attorneys qualified to answer your questions. The full text of the new law can be accessed at: http://www.leginfo.ca.gov/cgi-bin/postquery?bill_number=ab_22&sess=CUR&house=A&author=mendoza
Heather K. Whitham