Maryland Latest US State to Place Restrictions on Use of Credit Checks by Employers

Joining four other U.S. states – Hawaii, Illinois, Oregon, and Washington – prohibiting the use of credit information by employers, Maryland has enacted new legislation placing restrictions on so-called credit checks by employers that use the credit report or credit history of job applicants or employees for employment decisions. The law, known as the ‘Job Applicant Fairness Act,’ was signed by Maryland Governor Martin O’Malley in April of 2011 and will take effect on October 1, 2011.

Along with prohibiting an employer from using the credit report or credit history of an employee or job applicant for employment purposes, the ‘Job Applicant Fairness Act’ specifically prohibits most employers from using credit checks to determine whether to:

  • Deny employment to a job applicant;
  • Discharge an employee;
  • Decide compensation; or
  • Evaluate other terms and conditions of employment.

While the Act applies to Maryland employers of any size, some employers are excluded from the Act’s prohibitions, including:

  • Financial institutions, and
  • Employers required under federal or state law to inquire into the credit history of job applicants or employees.

In addition, the Act also allows exceptions for employers to request or use credit history information if the data is related to “a bona fide purpose that is substantially job–related.” The Act reads as follows:

(c)  When employer may request or use employee’s credit history. —

(1)  An employer may request or use an applicant’s or employee’s credit report or credit history if:

  • (i) 1.   the applicant has received an offer of employment; and 2.   the credit report or credit history will be used for a purpose other than a purpose prohibited by subsection (b) of this section; or
  • (ii) the employer has a bona fide purpose for requesting or using information in the credit report or credit history that is: 1.   substantially job-related; and 2.   disclosed in writing to the employee or applicant.

(2)  For the purposes of this subsection, a position for which an employer has a bona fide purpose that is substantially job-related for requesting or using information in a credit report or credit history includes a position that:

  • (i)  is managerial and involves setting the direction or control of a business, or a department, division, unit, or agency of a business;
  • (ii) involves access to personal information, as defined in § 14-3501 of the Commercial Law Article, of a customer, employee, or employer, except for personal information customarily provided in a retail transaction;
  • (iii) involves a fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money, or enter into contracts;
  • (iv) is provided an expense account or a corporate debit or credit card; or
  • (v) has access to: 1.   information, including a formula, pattern, compilation, program, device, method, technique, or process, that: A.  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 B.  is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; or 2.   other confidential business information.

The Act also requires that employers wishing to request or use credit information of job applicants and employees for a bona fide purpose must disclose the intent to do so in writing to the job applicant or employee.

If an employer has violated the Act, individuals may file a complaint with the Maryland Commissioner of Labor and Industry for investigation, and the Commissioner may assess civil penalties of up to $500 for initial violations and up to $2,500 for repeat violations.

As reported in earlier posts on the ESR News blog, Maryland – as well as several other U.S. states and the federal government – considered placing restrictions on the use of credit checks by employers:

For the second year in a row, the controversial use of credit reports by employers during employment screening was the number one trend on the ‘Fourth Annual Top Ten Trends in Background Screening for 2011’ list chosen by Employment Screening Resources (ESR), a background check provider accredited by  The National Association of Professional Background Screeners (NAPBS®). To see the full list, visit http://www.esrcheck.com/Top-Ten-Trends-In-Background-Screening-2011.php.

For more information about background checks, visit Employment Screening Resources (ESR) at http://www.ESRcheck.com.

About Employment Screening Resources (ESR): Founded in 1996 in the San Francisco Bay area with a mission to help employers and employees maintain safe workplaces, Employment Screening Resources (ESR) wrote the book on background checks with ‘The Safe Hiring Manual’ by ESR founder and President Lester Rosen. ESR is Accredited by The National Association of Professional Background Screeners (NAPBS®) and is a Designated E-Verify Employer Agent helping U.S. businesses maintain legal workforces. For more information about Employment Screening Resources, visit http://www.ESRcheck.com or email ESR News Editor Thomas Ahearn at tahearn@ESRcheck.com.

Sources:
http://mlis.state.md.us/2011rs/chapters_noln/Ch_29_hb0087T.pdf
Seyfarth & Shaw LLP: Maryland Joins Illinois, Washington, Oregon and Hawaii In Placing Restrictions on Employers’ Use of Credit Checks (04/25/2011)