New CA Law Affects Employers Using Credit Reports in Making Hiring Decisions

A new law, effective January 1, 2012, substantially limits when and how an employer in California can use consumer credit information in making hiring and other employment decisions.

Assembly Bill 22 (which can be viewed by going to http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_22_bill_20050921_chaptered.pdf) strictly prohibits employers and prospective employers from using a consumer credit report for employment purposes, unless the position of the person for whom the report is sought meets any of the following criteria:

• A “managerial” position (AB 22 defines a “managerial position” as an employee covered by the executive exemption set forth in the Industrial Welfare Commission’s Wage Order 4, Section 1, paragraph (A)(1);8 Cal. Code Regs. § 11040.);
• A position in the state Department of Justice;
• A sworn peace officer or other law enforcement position;
• A position for which the information contained in the report is required by law
to be disclosed or obtained;
• A position involving “regular access” to (1) the bank or credit card account
information, (2) the Social Security number, and (3) the date of birth of any
one person;
• A position held by (1) a named signatory on the employer’s bank or credit
card account, (2) someone authorized to transfer money on behalf of the
employer, or (3) someone authorized to enter into financial contracts on
behalf of the employer;
• A position that involves access to "trade secrets" (For the purposes of AB 22, trade secrets are defined in the same way as in California’s Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq.);

Employers should keep these new guidelines in mind when hiring new employees.