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California
California Senate Passes AB 22
The California Senate has passed, and the governor is expected to sign, AB 22 limiting the use of consumer credit reports for applicant screening and other employment purposes.
Like most bills restricting the use of credit reports in employment decisions, AB 22 includes categorical exemptions, allowing employers to obtain credit reports in situations including the following:
- A managerial position.
- A position in the state Department of Justice.
- That of a sworn peace officer or other law enforcement position.
- A position for which the information contained in the report is required by law
- A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to all of the following types of information of any one person:
- Bank or credit card account information.
- Social security number.
- Date of birth.
- A position in which the person is, or would be, any of the following:
- A named signatory on the bank or credit card account of the employer.
- Authorized to transfer money on behalf of the employer.
- Authorized to enter into financial contracts on behalf of the employer.
- A position that involves access to confidential or proprietary information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may obtain economic value from the disclosure or use of the information, and (ii) is the subject of an effort that is reasonable under the circumstances to maintain secrecy of the information.
- A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday.
Before requesting a credit report in any of these situations, the employer must provide the applicant or employee a notice that:
- says that the employer will use the report;
- identifies the source of the report;
- identifies the specific basis listed above that allows the credit report; and
- allows the applicant or employee to request a free copy of the report from the employer by checking a box.
If the employee checks the box, the employer must request a copy for the applicant or employee at the same time as the employer requests the report. The employer may not charge the applicant or employee for the copy.
The law does not apply to any position with a financial institution subject to the Gramm-Leach-Bliley Act.
Assuming that the governor signs the bill into law, it will go into effect on January 1.
Clients should immediately plan on how to change their background screening notices to applicants and employees. GIS can add the service of sending copies of reports to applicants and employees who request them.
The bill is currently being proof read and edited, however for the most current version, please visit http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/ab_22_bill_20110901_amended_sen_v96.html.
Connecticut
Connecticut Limits Employers’ Use of Credit Reports
With important exceptions, a new Connecticut law prohibits employers from requiring employees to consent to a credit check as a condition of employment. The new law takes effect on October 1, 2011.
The law is available at http://www.cga.ct.gov/2011/ACT/PA/2011PA-00223-R00SB-00361-PA.htm. The most important part of the statute reads as follows:
No employer or employer's agent, representative or designee may require an employee or prospective employee to consent to a request for a credit report that contains information about the employee's or prospective employee's credit score, credit account balances, payment history, savings or checking account balances or savings or checking account numbers as a condition of employment unless
- such employer is a financial institution,
- such report is required by law,
- the employer reasonably believes that the employee has engaged in specific activity that constitutes a violation of the law related to the employee's employment, or
- such report is substantially related to the employee's current or potential job or the employer has a bona fide purpose for requesting or using information in the credit report that is substantially job-related and is disclosed in writing to the employee or applicant.
Generally, employment-purposes credit reports do not include credit scores, but do include information about credit account balances and payment history.
The statute defines “substantially related to the employee's current or potential job" as meaning that:
the information contained in the credit report is related to the position for which the employee or prospective employee who is the subject of the report is being evaluated because the position:
- Is a managerial position which involves setting the direction or control of a business, division, unit or an agency of a business;
- Involves access to customers', employees' or the employer's personal or financial information other than information customarily provided in a retail transaction;
- Involves a fiduciary responsibility to the employer, including, but not limited to, the authority to issue payments, collect debts, transfer money or enter into contracts;
- Provides an expense account or corporate debit or credit card;
- Provides access to (i) confidential or proprietary business information, or (ii) information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that: (I) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from the disclosure or use of the information; and (II) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; or
- Involves access to the employer's nonfinancial assets valued at two thousand five dollars or more, including, but not limited to, museum and library collections and to prescription drugs and other pharmaceuticals.
Employers should be wary of literal reliance on part (F), since very few jobs have no access to assets valued at $2,005 or more. Employers may want to embrace a more cautious interpretation of “access” – that the access must be more than the access that a customer or the general public would have.
The statute provides for a civil penalty of $300 per violation.
FEDERAL UPDATES
FTC Issues New Guidance on the Fair Credit Reporting Act
The Federal Trade Commission (FTC) has issued a new staff report comprehensively updating its guidance under the Fair Credit Reporting Act (FCRA).
In 1990, the FTC issued a commentary on the FCRA (published as an appendix to 16 CFR part 600). Between 1997 and 2001, it issued informal opinion letters in response to selected questions that it received. Changes to the FCRA, primarily in 1996 and 2003, rendered much of the prior commentary obsolete. The new guidance reflects the FTC’s most up-to-date guidance.
Additionally, the FTC has formally withdrawn its prior commentary. In a press release, the FTC notes that the reason for this is that the recent financial reform legislation transferred the FTC’s authority to issue this kind of guidance to the newly created Consumer Financial Protection Bureau.
The FTC says that the new guidance mostly codifies its prior positions, but that it modifies some of its prior interpretations. Therefore, there may be new regulatory positions set out in the 117-page document.
Please see below for links to the documents referenced in this update:
FTC Says Screening of Volunteers is for Employment Purposes Under the FCRA
In its newly issued staff report that updates its guidance under the Fair Credit Reporting Act (FCRA), the Federal Trade Commission (FTC) says that the term employment purposes includes “a nonprofit organization staffed in whole or in part by volunteers.” (See page 32 of the report.)
The sources cited in the footnote for this assertion do not support it. The first source cited there is Hoke v. Retail Credit Corp. in that case, the court construed the words employment, promotion, and reassignment in the definition of “employment purposes” have “specific meanings in the area of activities for the production of income.” By definition, volunteering is not an activity for the production of income. The other two sources that the footnote cites, the Allison and Solomon information staff opinion letters, both deal with cases in which the activity in question was income-producing (independent truck drivers in Allison and title insurance agents in Solomon).
However, courts often defer to the FTC’s guidance on matters under the FCRA. Therefore, anyone who screens volunteers should consider immediately adopting the practices related to employment-purpose screening, including disclosure, authorization, and pre-adverse-action notices.
Please see below for links to the documents referenced in this update:
Louisiana Enacts E-Verify Legislation
On July 1, 2011, Governor Bobby Jindal signed HB 646 into law, creating Act 402. Act 402 revises Louisiana’s existing immigration provisions to require employers to perform some form of employment eligibility verification to check on the immigration status of their employees.
To perform employment eligibility verification, employers can either use E-Verify or they can keep the following items in their files: Copies of employees’ photo identifications and one other document that shows the workers are in the country legally (e.g. U.S. birth certificate or birth card, naturalization certificate, certificate of citizenship, alien registration receipt card, or U.S. immigration form I-94 with employment authorized stamp).
Effective August 15, 2011, employers who use the E-Verify system will not be liable if an employee was later revealed to be working illegally. The same protection is not extended to employers who opt to keep the above listed items in their files.
Employers who knowingly employ undocumented workers will face the following consequences:
- First offense - $500 fine per new hire
- Second offense - $1,000 fine per new hire
- Third offense - revocation of business licenses for 30 days to 6 months.
To read the bill, please visit http://www.legis.state.la.us/billdata/streamdocument.asp?did=760907.
North Carolina Enacts E-Verify Bill
On June 23, 2011, Governor Perdue signed HB 36, requiring employers and local governments to begin using E-Verify.
Employers with 500 or more employees must comply by October 1, 2011; 100-499 by January 1, 2013, and 25-99 by July 1, 2013. State agencies and municipalities must also begin using E-Verify by October 1, 2011.
Some exceptions do exist, including exceptions regarding who must be screened. Click here for more details.
Oklahoma Supreme Court Upholds E-Verify Law
The Oklahoma Supreme Court has upheld the Oklahoma Taxpayer and Citizen’s Protection Act of 2007 (HB 1804).
HB 1804 requires public entities and private contractors to use E-Verify or a similar system to confirm employment eligibility of new hires.
South Carolina Enacts Immigration Bill
On June 28, 2011, Governor Haley signed SB 20 which requires in part that employers use E-Verify to check employment eligibility for all employees.
Under the new law, penalties for knowingly employing illegal immigrants will include suspension or revocation of business licenses by the state.
Under HB 440, all SC employers have been required to perform some form of employment eligibility verification since July 2010. Click here for more details on SB 20.
Reprinted with permission from CCH, a Wolters Kluwer Company
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