The state of Oregon passed legislation this week that specifically prohibits employers from using credit history in making employment decisions such as hiring, discharging, promoting and compensating unless that individual is given advance notice in writing and the credit history is related to the position. There are, however, additional exceptions for positions with financial institutions and public safety offices. This new law classifies any violation of this rule as an ‘unlawful employment practice” that can be enforced through the Bureau of Labor and Industries and through civil action.
Recent statistics are scarce, but when the Society for Human Resource Management polled its members in 2006, 43% of their companies administered credit checks on some or all potential hires, which was up from 25% in 1998.
Hawaii and Washington are the only other states so far that have enacted legislation that restricts an employer’s use of a job applicant’s credit history. Hawaii’s law was enacted in 2009, over the governor’s veto, and Washington’s in 2007. In 2008, a similar bill passed both houses of the California legislation but was vetoed by Gov. Arnold Schwarzenegger.
In 2010 legislative sessions however, more than a dozen states are considering legislation that would limit an employer’s ability to consult credit history in making employment decisions. Those states include Connecticut, Georgia, Illinois, Maryland, Michigan, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, South Carolina, Vermont and Wisconsin.
We realize that credit check results are open to the interpretation of the company requesting them on behalf of their job applicants. To abolish the use of credit reports altogether would be a travesty for those organizations that utilize due diligence when hiring qualified staff. A great amount of useful information can be gleaned from the results of a credit check, and the data is especially important for those candidates whose role would be in a fiduciary capacity.