By Thomas Ahearn, ESR News Blog
To the relief of a number of California employers, California Governor Arnold Schwarzenegger has vetoed a bill passed by the California Legislature– AB 482 – that would have limited the use of credit reports by employers during employment background checks.
Assembly Bill (AB) 482 would have prohibited employers from using credit checks for employment purposes, except in limited circumstances. In his “veto message” to the members of the California state assembly, the Governor stated that he vetoed the bill because existing law already provided protections for employees from improper use of credit reports and that the bill would “significantly increase the exposure for potential litigation over the use of credit checks.”
To the Members of the California State Assembly:
I am returning Assembly Bill 482 without my signature.
This bill would prohibit an employer from using a consumer credit report for employment purposes with certain exceptions.
This bill is similar to legislation I have vetoed for the last two years on the basis that California’s employers and businesses have inherent needs to obtain information about applicants for employment and existing law already provides protections for employees from improper use of credit reports. As with the last two bills, this measure would also significantly increase the exposure for potential litigation over the use of credit checks.
For these reasons, I am unable to sign this bill.
The use of credit reports by employers during employment background checks has become a very controversial subject. Several states have limited the use of credit reports for employment purposes and a federal bill seeks to ban credit report checks for most employment screening.
The Employment Screening Resources (ESR) News Blog has posted several articles on the use of credit repots during employment background checks:
- New Illinois Law Prohibits Pre-Employment Credit Checks on Most Job Applicants
- Oregon Issues New Rules on Use of Credit History for Employment Decisions
- Federal Bill Seeks To Ban Credit Report Checks for Most Employment Screening
However, ESR has also written about how ‘Credit Reports of Job Applicants May Not Always Be So Important To Employers’ to address concerns of applicants who are concerned how their damaged credit would affect their job searches. Employment credit checks are not as common as most people think.
According to a recent survey from the Society for Human Resource Management (SHRM), while 60% of organizations performed some type of credit report checks on job candidates, only 13% conducted credit report checks on all job candidates and 47% of organizations performed credit report checks on selected job candidates, mostly for executive positions or positions with financial responsibility or access to confidential or proprietary information.