Over the past few years there has been substantial debate about the use of credit reports for employment purposes.  Many foes of the practice have contended that with the bad economy, skyrocketing medical bills and other economic woes, many people have bad credit yet can be good employees.  They argue that disqualifying applicants with bad credit will keep many people unemployed. 

Over the weekend Governor Brown signed Assembly Bill 22 which impacts an employer’s right to conduct credit report checks.  AB 22 limits the positions for which a consumer credit report can be performed and requires additional notices before and after a check is conducted. The law becomes effective January 1, 2012. 

Sierra HR Partners has updated its forms to reflect the new law and will provide them to clients for use in 2012.

What has changed?
·        A consumer credit report may be conducted for persons applying for the following positions only:
·         A managerial position;
·         A position in the state Department of Justice, a sworn peace officer or other law enforcement position;
·         A position for which the law requires that a consumer credit report to be obtained;
·         A position that involves regular access to the bank or credit card account information, social security number, and date of birth for any person (except for routine credit card solicitations or applications);
·         A position that requires the person to be named signatory on company bank or credit card accounts;
·         A position that authorizes the person to transfer money on behalf of the employer;
·         A position for which the person is authorized to enter into financial contracts on behalf of the employer;
·         A position that involves access to confidential, proprietary or trade secret information; and
·         A position that involves regular access to cash totaling $10,000 or more during a workday.
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·         Before conducting a consumer credit check, the employer must provide written notice to the applicant indentifing the specific basis for conducting the check (Pre-report notice).  The notice must include a box that the applicant can mark on the order to obtain a copy of the report. 
·         If employment is denied based partially or completely on the consumer credit report, the employer must so advise the applicant and provide the name and address of the reporting agency (Post-decision notice). 
Note:  A consumer credit report is defined as any written, oral, or other communication of any information by a consumer credit reporting agency bearing on a consumer’s credit worthiness, credit standing, or credit capacity. These reports do not include verifying income or employment, and credit related information, such as credit history, credit score or credit record. 
What should I do now?
If you use Sierra HR Partners for your background checks, you are in a good position.  Sierra HR Partners will provide you with the necessary pre-report notice for the credit checks conducted in 2012.  You will need to send out your own post-decision notices to applicants if information in the consumer credit report affected your decision.  The notice can be simple.  Include in your letter to the applicant, “The company has made its decision, based in whole or in part, on the consumer credit report conducted.  Sierra HR Partners, Inc. provided the consumer credit report for the company.” 
I advise all employers to conduct background checks for its applicants.  A background check is a valuable source of information in the hiring process.  Sierra HR Partners offers comprehensive background investigation services at competitive rates.  Please feel free to contact them at 559-431-8090.