Legislative Alert for California: Two Bills Await the Governor’s Approval or Veto

There are currently two bills that have passed the state legislature in California that are awaiting a decision by the Governor.  AB 2918 radically changes the use of credit reports for employment purposes.  According to the California Legislative Counsel, “This bill would prohibit the user of a consumer credit report, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes unless the information is (1) substantially job related, meaning that the information in the consumer credit report relates to the position for which the person who is the subject of the report is being evaluated because the position has one or more specified characteristics, is a highly compensated or managerial one, or (2) required by law to be disclosed to, or obtained by, the user of the report.”  There is no definition as to what “highly compensated or managerial positions” means.  This bill, if signed into law by the Governor, represents a growing trend to limit the use of credit reports for employment purposes.

It is important to note that an employment credit report does NOT contain a credit score, since that is not a valid predictor of job performance.  However, it does contain a credit history, such as late payments and amounts due to financial institutions.  In numerous articles, ESR has advised employers to approach credit reports with caution.  However, this bill may result in outlawing employers from running credit reports on bookkeepers or others that handle money or have access to assets.

A second bill that is currently at the Governor’s desk awaiting his approval or veto is AB 3063. According to the California Legislative Counsel, this law would clarify existing California law dealing with the technical rules on the use of criminal records by employers.  Currently, the regulations of the Department of Fair Employment and Housing prohibit certain criminal matters from being considered by employers.  This law would place those same restrictions in the Labor Code. This bill would have no impact on ESR clients since ESR already utilizes the criteria of the Department of Fair Employment and Housing Commission in determining if a criminal record should be reported.

ESR will immediately send a special newsletter to its clients if these bills are signed into law that will explain the practical impact.