California employers can’t check credit reports on all applicants

Those who are looking for jobs this New Year in California may be relieved to know that companies can no longer check the credit reports of job applicants unless the position with the company meets specific requirements. This not only means that more applicants may have a greater chance of landing the jobs they want this year, but it may also ensure better privacy protections for potential employees.

Employers in many states run credit reports on job applicants as part of the background check process. Unfortunately, these reports don’t always give applicants a fair shot at getting hired because employers may assume that one’s poor credit history indicates that the individual is not responsible or trustworthy. Credit reports also might disclose one’s private information such as going through a divorce, losing one’s house to foreclosure or medical concerns.

The new law, which went into effect Jan. 1, 2012, prohibits employers in California from using credit reports during the background check process in order to determine whether or not a prospective employee is capable of doing the job.

However, employers may still use the reports when hiring individuals for positions that require a clean credit history. Employers may still legally check credit reports on individuals who apply for the following types of jobs:

  • Management positions
  • Positions with the state Department of Justice
  • Sworn peace officers or other positions in law enforcement
  • Positions that require an individual to regularly access the confidential information of others such as Social Security numbers, bank accounts and credit card accounts

Many are in favor of the new law in California and they believe that job seekers will be treated more fairly during the application process. Although a person may have made some financial mistakes in the past, that is not always an indicator that an individual is incapable of doing his or her job well.

California is the seventh state to adopt laws that protect some job seekers from having their credit reports reviewed during background checks.

Source: WHEC.com, “Some states working to block companies from checking credit scores of prospective employees,” Jan. 3, 2012

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