Hunton Employment & Labor Perspectives

On October 10, 2011, California became the seventh state to enact legislation restricting public and private employers alike from using consumer credit reports in making hiring and other personnel decisions.  Assembly Bill No. 22 both adds a new provision to the California Labor Code -- Section 1024.5 -- and amends California’s Consumer Credit Reporting Agencies Act (“CCRAA”).  Effective January 1, 2012, California employers will be prohibited from requesting a consumer credit report for employment purposes unless they meet one of the limited statutory exceptions, and those employers meeting an exception, will be subjected to increased disclosure requirements.  Connecticut, Illinois, Hawaii, Oregon, Maryland and Washington already have similar laws on the books, and many other states, as well as the federal government, are contemplating similar legislation.  This trend creates a potential “credit-centric” minefield for employers that do business in any one or more of these states.  In light of the multiple laws affecting their use, employers who utilize consumer credit reports in making personnel decisions should proceed cautiously.  Employers must evaluate the need for these reports in making personnel decisions, review and modify their policies to ensure compliance with the myriad of regulations in this area, and monitor any new developments to ensure continued compliance.