It may not seem like it, but credit ratings are woven into nearly every important decision a person will make. Whether it be buying a car, buying a home, or even financing an important purchase, a person’s credit rating factors into the decision. One area that a credit rating may or may not factor into is a job application. Most California employers don’t require a credit check of a job applicant, but it is still helpful to know what legal protections are in place.
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What Information is on a Credit Report or Rating?
Before answering the question of why an employer would want to check the credit rating of a potential job candidate, it may be helpful to know exactly what information is-and is not-included in a credit report or credit rating. In general, credit reports usually included the following information:
- Personally Identifiable Information (PII) – This includes the applicant’s name, address, social security number, date of birth, and employment information
- Credit Accounts – Includes other credit accounts the applicant has, including the type of account, date the account was opened, and payment history.
- Credit Inquiries – Includes a list of all inquiries made for the applicant’s credit report or rating within the previous two years.
- Public Records – Includes information from state and county courts regarding the applicant, including bankruptcies. Also includes any debt that is overdue and has been sent to collections.
On the other end of the spectrum, the following information will not show up on a California credit report:
- Medical information (unless the applicant provided written consent to release)
- Bankruptcies dating back ten years
- Lawsuits or judgements dating back seven years.
- Tax liens dating back seven years.
- Evictions
- Arrest records, indictments, misdemeanor complaints, or convictions dating back seven years.
Even though an employer has the right to request a job applicant’s credit rating, it’s important to understand that the employer does not have the right to use it as a reason to not hire the applicant.
What Does California Law Say About Checking the Credit Rating of a Job Applicant?
Under California law, employers have two requirements when they wish to order a credit report or rating of a job applicant:
- They must provide notice to the applicant.
- They cannot use the information contained in the report to make a hiring decision, under normal circumstances.
Notice Requirements
California’s notice requirements closely resemble the Fair Credit Reporting Act (FCRA), which is the federal law that protects citizens and job applicants from their credit report being accessed without their consent. In order to meet notice requirements in California, employers must:
- Notify the applicant in writing that they are ordering their credit report
- Provide the applicant with a copy of the report
- Provide another written notice to the applicant if they intend to not hire the applicant based on the credit report’s information.
Exceptions to the Law
Notably, exceptions to the law exist which allow an employer to not only request an applicant’s credit report, but also to utilize it when they make their hiring decision. These exceptions typically include applicants for the following positions:
- Management
- Law enforcement or state department of justice
- Any position where the information is required by law to be obtained and used.
- Any position that routinely involves accessing sensitive personal information, trade secrets, or other proprietary confidential information.
- Bank employees or positions within a credit department.
What Legal Remedies Are There for Applicants?
There are two main avenues for legal action for California job applicants that believe an employer has illegally obtained and used their credit report information to not hire them for a job. First, there is the California Fair Chance Act (CFCA). This law protects applicants when an employer tries to use the applicants’ criminal history as a reason for not hiring them. The other protection is the California Fair Employment and Housing Act (FEHA), which prohibits an employer from illegally discriminating against an applicant and not hiring them because of a protected characteristic that could be found on a credit report, such as their race, gender, age, etc.
Under these laws, applicants would be able to file a civil lawsuit for damages under a failure to hire claim. A failure to hire claim, if successful, could help the applicant recover the following:
- Lost wages
- Emotional distress
- Mental anguish
- Loss of enjoyment of life
- Punitive damages, if the employer acted recklessly.
On top of these damages, the court could order that the employer hire the applicant for the original position.
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Maison Law is proud to stand up for the rights of California employees and job applicants. Their team of California employment lawyers will be able to help investigate and litigate any employment related claim a client may have. To get started with a free consultation, contact their office today.
