Background checks for employment screening purposes may contain different information.  Most common would be the use of criminal history information, but there are times when an employer requests that their background screening vendor also provide credit history information for a job applicant or employee.

Employers who request credit history information be included in background investigations must, in addition to complying with the requriements of the Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.), be aware of state restrictions on the use of credit information for employment screening purposes.  States like Illinois, California and Maryland (and others) restrict the use of credit by employers, as do cities such as New York City and Philadelphia.  Generally, these laws restrict the use of credit unless there is a basis for the use of credit history information tied to the position for which a job applicant has applied.

A recent case in Illinois highlights the struggles employers face in those states where there are restrictions.

In a lawsuit against Neiman Marcus, a job applicant alleged that the retailer discriminated against her when it ran a credit check for a position as a sales associate.  Mind you, the plaintiff did apparently have a credit history to report (e.g., judgments, collections) but she alleged that Neiman Marcus violated the Illinois Employee Credit Privacy Act (820 ILCS 70/1 et seq.) and that the job-based exemption they claimed did not exempt them from the requirements of the law.

Neiman Marcus argued that as a sales associate the plaintiff would have access to credit card applications which contained sensitive personal information and accordingly the credit check was acceptable as a “bona fide occupational requirement of a particular position.”  Neiman Marcus also argued that they were exempt from the Employee Credit Privacy Act due to access to cash and signatory power.  The lower court agreed Neiman Marcus acted appropriately when it ran a credit check, but the state appellate court said not so fast.  (Ohle v. The Neiman Marcus Group, Case No. 1-14-1994, Illinois Court of Appeals, First District, Second Division, Sept. 27, 2016)

Illinois law synopsis — the legislative intent behind the Employee Credit Privacy Act is that it “prohibits employers from inquiring about or using an employee’s or prospective employee’s credit history as a basis for employment.”   The law lists several industry specific exemptions for, for instance, banking and financial industry positions or law enforcement positions. And it also states that where a “bona fide occupational requirement” for a particular position exists (and the law lists specific examples) then the employer would be exempt from the law’s requirements as well.

The bottom line is that if you are in a state which restricts the use of credit for employment screening purposes and you in fact request credit history from your background screening vendor, you need to be aware of not only state restrictions but also local restrictions regarding its use.