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Law limits employer checks

Regulation takes effect Jan. 1, narrows circumstances in which a boss can look at new hires' credit

Posted: January 14, 2012 2:00 a.m.
Updated: January 14, 2012 2:00 a.m.
 

 

 

A state law that went into effect Jan. 1 narrows the circumstances in which an employer can request a credit check of a current or potential employee.

About 13 percent of employers request credit checks for employees or candidates, typically for sensitive positions or jobs for which the employee handles money, said Julie Weith Smith, president of Custom Human Resource Solutions, a local Santa Clarita Valley Human Resources consulting firm.

Smith said the reasoning is, "If the employee has good credit, the employee shows they’re a responsible person and they’re not going to be irresponsible with the company’s cash."

But legislators that supported the bill argue that employers are unfairly discriminating against potential employees based on their credit scores, particularly in the current economy where a bad credit score could be a sign of the times, not of the trustworthiness of a candidate.

"This bill has the ability to put countless unemployed Californians back to work and will end the needless catch-22 that occurs when those seeking work to pay their bills cannot find it due to poor credit," said bill sponsor Assemblyman Tony Mendoza in a statement.

Mendoza had introduced the bill twice under Gov. Arnold Schwarzenegger in 2009 and 2010. It was signed by Gov. Jerry Brown in October 2011.

Smith agreed that situations that can result in bad credit — such as a divorce — are not indicative of the employee’s character.

"I think that is a huge mistake for employers to make and especially in this kind of economy where all types of things are happening," Smith said.

The bill leaves exceptions for positions within the State Department of Justice, a sworn peace officer or other law enforcement position, anyone with access to trade secrets, access to $10,000 or more in cash during the workday, and anyone who regularly works with information that can be used to commit identity theft.

Brian Koegle, a local attorney experienced in employment law, said he thinks the bill creates needless restrictions because employers do not perceive bad credit the same way now as they did five years ago.

"It is a diametric shift in the way employers view negative credit history," he said.

Koegle also called the $10,000 limit "arbitrary," asking why employers shouldn’t be able to do a credit check for anyone who handles a register or cash.

"You think about hiring a clerk at Target or Home Depot and these folks are handing cash on a daily basis," Koegle said. "And you want to find out, does this person have a reason that they would want to steal from me?"

Instead, Koegle suggested that the state allow employers to defend their need for a credit check, instead of setting a few exceptions.

"I think that there are some employers out there that certainly misused the credit card background check," he said. "But if you articulate a legitimate business reason, we’re going to trust you, going to presume you’re using them for legitimate business interests."

 

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