Pre-employment background checks that include credit reports can get California employers in trouble. If you are an employer in California and you include Credit Reports in your employment background investigations be aware of the rules govern what types of positions allow a Credit Check to be run. Review the new requirements carefully.
California Assembly Bill 22 (AB 22) amends Section 1785.20.5 of the Civil Code and adds Chapter 3.6 (commencing with Section 1024.5) to Part 2 of Division 2 of the Labor Code, relating to employment. AB 22 prohibits employers or prospective employers – with the exception of certain financial institutions – from obtaining a consumer credit reports for employment purposes unless the position of the person for whom the report is sought is one of the following:
In addition, AB 22 also requires the written notice informing the person for whom a consumer credit report is sought for employment purposes to also inform that person of the specific reason for obtaining the report.
If you elect to run a Credit Report remember that a credit report for employment does not include a credit score or FICO that many people are accustomed to seeing on a typical credit report that is pulled when you buy a car or house. Also, credit reports for employment purposes no longer include public records. This means any bankruptcies, judgments or liens will be removed.
An alternative to running a Credit Report would be a BJL search. This would be a standalone search that would look for bankruptcies, judgments and liens only.
California Passes AB 22 Placing Restrictions on Use of Credit Checks by Employers: Link Below to the Actual Bill
NOLO Article: “Can Prospective Employers Check Your Credit Report?” Other States with Restrictions on Credit Reports (Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington)