New Limits On Employer Rights To Obtain Credit Reports

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On October 9, 2011, California Governor Brown signed several employment related bills into law that affect California employers. One of these bills, Assembly Bill 22, prevents most employers from obtaining preemployment credit information or reports about job applicants, with certain exceptions.

By way of background, the types and means of acquiring background information, including credit reports, about prospective employees are already regulated by law. Federal law is governed by the Fair Credit Reporting Act (“FCRA”) and administered by the Federal Trade Commission. California has its own similar, but in some respects stricter, regulations contained in the Consumer Credit Reporting Agencies Act (“CCRA”) as set forth in California Civil Code Sections 1785.1 et seq. In general, certain procedures must be followed and written consent must be received from applicants to obtain their credit report. Notices must inform applicants that a credit report will be used in the hiring decision, the source of the report and there must be a space, by way of a check box, for the applicant to request a free copy of the report. Whenever the employer bases an adverse employment decision on information contained in the credit report, it must advise the applicant of that fact and provide the name and address of the consumer credit agency making the report to enable the applicant to contest the information gathered in the report.

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