Know Employment Credit Check Limitations Per State – Part 3
April 10, 2021
By Susan Chance, courtesy of SBAM Approved Partner ASE
This is the last installment in the list of locations which have laws restricting the use of credit checks in employment decisions. Keep in mind that laws are constantly changing, and new laws can be enacted at any time.
Employers are only allowed to use credit checks for employment decisions if the information from the check is “substantially related” to the position or if the check is required by law and are required to provide:
“A written statement that consumer reports may be used for employment purposes that is contained in employee guidelines or manuals available to employees or included in written materials provided to employees constitutes written notice for purposes of this subsection. The exception is when the check is requested because the employer reasonable suspects the employee has “engaged in specific activity that constitutes a violation of law.”
Chicago, IL also has a Human Rights Ordinance prohibiting employers from asking applicants/employees about their credit history or obtaining credit checks on them and are prohibited from using the information to make employment decisions.
There are exemptions for the following positions:
- Insurance/surety companies
- Municipal law enforcement or investigative agencies
- Debt collection companies
- When law requires a person to have a satisfactory credit history, or the check would be a bona fide occupational qualification.
New York City
The NYC Human Rights Commission prohibits employers from:
- Asking applicants or employees about their credit history
- Obtaining credit reports
- Asking about “credit accounts, charged-off debts, items in collections, bankruptcies, judgments, and liens
- Asking about “home foreclosure and information about credit card debt, child support, and student loans”
Employers cannot use credit history in making employment decisions. The only exceptions are for:
- Police and peace officers (not private security guards); and
- Executive-level jobs with power over finances, computer security, or trade secrets.
Employers are to keep an “exemption log” of all exemptions made, keeping records for five years from the date of each exemption listing:
- The exemption claimed;
- How the subject fits the exemption;
- Qualifications of the subject for the position/promotion;
- Name and contact information of the subject;
- Nature of the credit history information considered and a copy of such information;
- How the credit history information was obtained; and
- How credit history impacted employment action.
These logs may have to be provided to the Commission; quick responses may help avoid investigations into employment practices.
The “Fair Practices Ordinance” limits situations in which employers can use credit checks for employment decisions to:
- To the City of Philadelphia with respect to efforts to obtain information regarding taxes or other debts owed to the City;
- If such information must be obtained pursuant to state or federal law;
- If the job requires an employee to be bonded under City, state, or federal law;
- If the job is supervisory or managerial in nature and involves setting the direction or policies of a business or a division, unit or similar part of a business;
- If the job involves significant financial responsibility to the employer, including the authority to make payments, transfer money, collect debts, or enter into contracts, but not including handling transactions
- If the job requires access to financial information pertaining to customers, other employees, or the employer, other than information customarily provided in a retail transaction; or
- If the job requires access to confidential or proprietary information that derives substantial value from secrecy.
If any of the information in a credit check is used for making employment decisions, employers must make a disclosure, in writing, to the subject, then give them the opportunity to explain the circumstances around the information before taking any adverse action.