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August 2010 Vol. 10, No. 8
1. New Illinois Law Prohibits Pre-Employment Credit Checks on Most Job Applicants
SMost job applicants and employees in the state of Illinois with less-than-stellar credit histories will soon not have to worry about employers running credit checks on them.
According to a press release from the State of Illinois news page at Illinois.gov, Governor Pat Quinn signed a bill into law that prohibits Illinois employers from discriminating based on the credit history of job seekers or employees. The new law - which takes effect on January 1, 2011 - removes a significant barrier to employment for jobseekers whose credit history has been affected by the greatest economic recession since the 1930's.
Illinois House Bill 4658 creates the "Employee Credit Privacy Act," which prohibits employers from inquiring about or using an employee's or prospective employee's credit history as a basis for employment, recruitment, discharge, or compensation. Employers who violate the new law can be subject to civil liability for damages or injunctive relief.
The new law, according to a quote from Governor Quinn in the press release, "will stop employers from denying a job or promotion based on information that is not an indicator of a person's character or ability to do a job well."
However, while the "Employee Credit Privacy Act" forbids employers from inquiring about an applicant or employee's credit history or obtaining a copy of their credit report, the law does not affect an employer's ability to conduct a thorough background check that does not contain a credit history or credit report. In addition, under the new law, employers may access credit checks under limited circumstances, including positions that involve:
According to the press release, pre-employment credit screenings are on the rise throughout the nation, as recent surveys by the Society for Human Resources Management (SHRM) found that 60 percent of employers run a credit check on at least some applicants, an increase from the 42 percent in 2006 and 25 percent in 1998.
More specifically, the SHRM surveys found that 13 percent of organizations performed credit checks on all candidates while 47 percent performed credit checks on selected job candidates, mostly for positions with fiduciary and financial responsibility such as handling cash, banking, and accounting.
Sources:
http://www.illinois.gov/PressReleases/ShowPressRelease.cfm?SubjectID=1&RecNum=8737
http://e-lobbyist.com/gaits/text/21025
2. ESR Quoted on MSNBC Regarding Credit Reports
According to a recent article on MSNBC - Job Candidates Undergoing Credit Scrutiny - applicants applying for jobs these days can expect prospective employers to verify resume information, contact references, possibly do a criminal background check, and even be asked by companies to allow credit checks to scrutinize their credit histories.
The article cites a recent survey by the Society for Human Resource Management (SHRM) in which 60 percent of the responding companies claimed they perform credit checks of some or all job candidates. Breaking down the survey results further, only 13 percent of organizations performed credit checks on all job candidates while 47 percent performed them on selected job candidates, usually for positions with fiduciary and financial responsibility such as handling cash, banking, and accounting.
MSNBC also reported that credit checks are required about half the time for senior executive positions and that the SHRM survey also showed that potential candidates with outstanding judgments, accounts in collection, or a bankruptcy in their file may be passed over for a job.
Lester Rosen, President of Employment Screening Resources (ESR), was quoted in the MSNBC article as saying employers are "looking at the debt level compared to the potential income from the job" and added that "if someone is under water financially as shown by the credit report, the thought is perhaps there could be a motive to embezzle or steal."
However, while Rosen says credit checks are one method employers may use to hire honest and trustworthy employees that also provide some legal cover if that employee turns out to be dishonest, ESR does not encourage routine credit checks on all candidates since credit checks often contain errors and can feel like an invasion of privacy to applicants.
Rosen's advice in the article for employers is to limit credit checks to relevant positions such as those that involve money. In fact, with many states recently passing laws limiting the use of credit checks for employment purposes, employers need to be careful when, to whom, and how they perform credit checks on prospective job applicants.
For jobseekers, ESR also provides information - at no charge - to job applicants on background checks and credit check reports can help job applicants navigate the background check process and maximize their chance at employment. The information is available on ESR's 'Applicant Resources' page at: http://www.esrcheck.com/Applicant-Resources.php.
Whether the use of credit checks for employment purposes is discriminatory to certain job applicants - which ESR named Trend Number One in its Third Annual Top Ten Trends in the Pre-Employment Background Screening Industry for 2010 - is a question that will be asked as long as employers run credit checks on applicants with money troubles.
Sources:
http://www.msnbc.msn.com/id/38561183/ns/business-consumer_news/
http://www.esrcheck.com/wordpress/2010/03/23/shrm-surveys-reveal-3-out-of-4-businesses-conduct-reference-background-checks-and-criminal-background-checks/
http://www.esrcheck.com/wordpress/2010/06/02/esr-provides-information-to-job-applicants-on-background-checks-and-credit-reports/
http://www.esrcheck.com/wordpress/2010/01/04/2010-trend-on-increased-focus-on-whether-credit-reports-and-criminal-records-are-discriminatory/
3. BP Oil Spill and Background Checks: News Stories Show Background Checks Occur at Intersection of Security and Privacy
Recently, two news stories about background checks from very different angles appeared in two major media outlets - CNN and the Wall Street Journal (WSJ) - on the same day.
The CNN story - "Investigation: Could background check have prevented alleged rape?" - investigated why British Petroleum (BP) and a company used to hire cleanup workers for the recent oil spill in the Gulf of Mexico did not perform basic background checks.
According to the CNN story, this lack of background checks for oil cleanup workers led to a sex offender landing a job and then allegedly raping a co-worker. A CNN investigation into the incident revealed that basic background checks were not performed on those hired to remove oil from the beaches in Mississippi.
A County Sheriff in Mississippi told CNN he learned from the head of BP security that no background checks were conducted on the cleanup workers and that he warned the BP official that BP risked the criminal element looking for jobs and they would not know who they were dealing with if they did not do background checks. The Sherriff also said that, if asked, his department would have performed the background checks for free.
The 41-year-old suspect - who faces charges of sexual battery and failure to register as a sex offender - has a criminal history dating back to 1991. He was put on the national sex offender registry for a 1996 conviction for contributing to the delinquency of a minor and was also on probation after being convicted in 2003 for cruelty to children, CNN reports.
While the CNN story shows the need for background checks for security reasons, a WSJ law blog - "Background Checks in Hiring: Discrimination or Due Diligence?" - asks if employers can disqualify job applicants simply for having a criminal past and finds the answer may not be so clear cut, at least according to a story by the Associated Press (AP).
The AP reports the Equal Employment Opportunity Commission (EEOC) is arguing that the practice of employers disqualifying applicants with criminal records or bad credit history may be discrimination since those applicants are "disproportionately black or Latino." The WSJ law blog also quotes the AP story to show that employers using a blanket refusal to hire applicants with criminal records could risk going against federal employment law:
If criminal histories are taken into account, the EEOC says employers must also consider the nature of the job, the seriousness of the offense and how long ago it occurred. For example, it may make sense to disqualify a bank employee with a past conviction for embezzlement, but not necessarily for a DUI.
The AP also reported that the EEOC filed a class-action discrimination lawsuit against a Dallas-based events planning firm in 2009, alleging that the firm "used credit history and criminal records to discriminate against blacks, Hispanics, and males."
The two news stories read back to back - one in which the failure to do a background check possibly led to a preventable crime, the other questioning if background checks using credit histories and criminal records are discriminatory - could leave employers wondering how much background checking is too much and how much is too little.
These two stories - appearing on the same day from major news organizations but with vastly different angles - underscore the point that background checks occur at the intersection of security and privacy. On the one hand, background checks can promote safety, security, and honesty while lessening the chance for workplace violence or the hiring of unqualified workers with fake credentials. On the other hand, employers using background checks should be concerned with issues of fairness and privacy while combating discrimination.
The solution for employers is reaching the right balance in their background check program.
Sources:
http://www.cnn.com/2010/CRIME/08/12/gulf.cleanup.workercharged/
http://blogs.wsj.com/law/2010/08/12/background-checks-in-hiring-discrimination-or-due-diligence/
http://hosted.ap.org/dynamic/stories/U/US_JOB_SCREENING_ILLEGAL_TACTICS?SITE=ORMED&SECTION=HOME&TEMPLATE=DEFAULT
http://www.esrcheck.com/wordpress/2010/03/15/background-check-bashing-either-too-much-or-too-little-depending-upon-the-most-recent-headline/
ESR Articles (click for more info)
The FCRA in 4 Easy Steps
Find out how to be in compliance with the FCRA
Criminal Records and Employment Applications
What questions should employers be asking?
10 Safe Hiring Tools
These tools don’t cost anything and promote a safe and profitable workplace
Negligent Hiring
What occurs when Due Diligence is not performed
Please feel free to contact Jared Callahan at ESR at 415-898-0044 or jcallahan@esrcheck.com if you have any questions or comments about the matters in this newsletter. Please note that ESR's statements about any legal matters are not given or intended as legal advice.
Employment Screening Resources (ESR)
www.ESRcheck.com
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Novato, CA 94945
415-898-0044
