California Restricts Employer Use of Credit Reports

Governor Jerry Brown recently signed into law a new restriction on the ability of employers to obtain credit reports for employment purposes. The law, California Assembly Bill 22 (“AB 22”), prohibits employers from using credit reports in the hiring or promotion processes. There are exceptions to the prohibition in AB 22, however. Employers may obtain credit reports for prospective or current employees who fall into certain exempt categories, including managerial positions (employees who qualify for the “executive exemption” under California wage and hour law), positions involving regular access to the personal information of others, and positions involving access to confidential or proprietary information of the employer. California joins six other states - Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington - in prohibiting employers from using the credit history of prospective or current employees in making hiring or employment decisions.

TIP: Beginning on January 1, 2012, California employers may not use credit reports for employment purposes unless the employee position falls into one of eight exempt categories. This prohibition applies to both prospective and current employees.