California workers enjoy some of the strongest labor laws in the nation, including rules around credit checks – and those rules are about to get even stronger.
Employers in this state are not permitted to perform credit checks on employees or job applicants without a clear, necessary reason.
When are credit checks allowed?
Generally speaking, credit checks are allowed when an employer has a legitimate need to protect themselves from potential risks related to an employee’s financial misconduct. To this end, they can pull credit records before hiring or promoting someone to:
- Managerial positions
- Positions that involve access to more than $10,000 in cash per day
- Positions that give access to proprietary or confidential information
- Positions where they would have access to others’ identifying information
- A position as a sworn peace officer or within the state’s Department of Justice
- Positions where they would be a signatory on the employer’s accounts, authorized to transfer money for their employer or have the power to enter into financial contracts for their employer
Effective July 1, 2025, employers must also be careful to make it clear that they are requesting credit records for employment purposes so that the credit reporting agencies can provide a response that does not include medical debt – which is no longer seen as a relevant factor when determining someone’s fiscal responsibility.
There are times when an employer needs to evaluate a job applicant’s or existing employee’s financial history to determine their trustworthiness. However, violations of the law – including
the use of credit reports or information that should be excluded from those reports to make employment decisions – should always be addressed. Legal guidance can help you determine your options.