Governor Brown Signs Two Bills Impacting Use of Credit Reports and E-Verify by Employers in California

Over the weekend, California Governor Jerry Brown signed two Assembly Bills – ‘AB 22’ and ‘AB 1236’ – that will impact the way employers in the state conduct credit report checks on job applicants and use the federal E-Verify employment eligibility verification system to check the work authorization status of newly hired employees. AB 22 prohibits most employers or prospective employers from obtaining consumer credit reports for employment purposes while AB 1236, the Employment Acceleration Act of 2011, prevents state and local governments from requiring California businesses to use E-Verify to check if newly hired workers are legally eligible to work in the United States. The new laws take effect January 1, 2012.

Introduced by Assembly Member Tony Mendoza (D-56th District), AB 22 will amend Section 1785.20.5 of the Civil Code, and to add Chapter 3.6 (commencing with Section 1024.5) to Part 2 of Division 2 of the Labor Code, relating to employment. The bill prohibits an employer or prospective employer – with the exception of certain financial institutions – from obtaining a consumer credit report for employment purposes unless the position of the person for whom the report is sought is:

  • (1) a position in the state Department of Justice,
  • (2) a managerial position as defined,
  • (3) that of a sworn peace officer or other law enforcement position,
  • (4) a position for which the information contained in the report is required by law to be disclosed or obtained,
  • (5) a position that involves regular access to specified personal information for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment,
  • (6) a position in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf,
  • (7) a position that involves access to confidential or proprietary information, as specified, or
  • (8) a position that involves regular access to $10,000 or more of cash, as specified.

AB 22 also requires the written notice informing the person for whom a consumer credit report is sought for employment purposes to also inform the person of the specific reason for obtaining the report. Under AB 22, the following changes will occur:

SECTION 1. Section 1785.20.5 of the Civil Code is amended to read:

1785.20.5.
(a) Prior to requesting a consumer credit report for employment purposes, the user of the report shall provide written notice to the person involved. The notice shall inform the person that a report will be used, and shall identify the specific basis under subdivision (a) of Section 1024.5 of the Labor Code for use of the report. The notice shall also inform the person of the source of the report, and shall contain a box that the person may check off to receive a copy of the credit report. If the consumer indicates that he or she wishes to receive a copy of the report, the user shall request that a copy be provided to the person when the user requests its copy from the credit reporting agency. The report to the user and to the subject person shall be provided contemporaneously and at no charge to the subject person.
(b) Whenever employment involving a consumer is denied either wholly or partly because of information contained in a consumer credit report from a consumer credit reporting agency, the user of the consumer credit report shall so advise the consumer against whom the adverse action has been taken and supply the name and address or addresses of the consumer credit reporting agency making the report. No person shall be held liable for any violation of this section if he or she shows by a preponderance of the evidence that, at the time of the alleged violation, he or she maintained reasonable procedures to assure compliance with this section.

SEC. 2. Chapter 3.6 (commencing with Section 1024.5) is added to Part 2 of Division 2 of the Labor Code, to read:

Chapter 3.6. Employer Use of Consumer Credit Reports

1024.5.
(a) An employer or prospective employer shall not use a consumer credit report for employment purposes unless the following criteria are satisfied:
(1) A managerial position.
(2) A position in the state Department of Justice.
(3) That of a sworn peace officer or other law enforcement position.
(4) A position for which the information contained in the report is required by law to be disclosed or obtained.
(5) A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to all of the following types of information of any one person: (A) Bank or credit card account information. (B) Social security number. (C) Date of birth.
(6) A position in which the person is, or would be, any of the following: (A) A named signatory on the bank or credit card account of the employer. (B) Authorized to transfer money on behalf of the employer. (C) Authorized to enter into financial contracts on behalf of the employer.
(7) A position that involves access to confidential or proprietary information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that (i) 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 may obtain economic value from the disclosure or use of the information, and (ii) is the subject of an effort that is reasonable under the circumstances to maintain secrecy of the information.
(8) A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday.
(b) This section does not apply to a person or business subject to Sections 6801 to 6809, inclusive, of Title 15 of the United States Code and state and federal statutes or regulations implementing those sections if the person or business is subject to compliance oversight by a state or federal regulatory agency with respect to those laws.
(c) The following definitions apply to this section:
(1) “Consumer credit report” has the same meaning as defined in subdivision (c) of Section 1785.3 of the Civil Code, but does not include a report that (A) verifies income or employment, and (B) does not include credit-related information, such as credit history, credit score, or credit record. (2) “Managerial position” means an employee covered by the executive exemption set forth in subparagraph (1) of paragraph (A) of Section 1 of Wage Order 4 of the Industrial Welfare Commission (8 Cal. Code Regs. 11040).

California now joins Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington as U.S. states that currently restrict the use of credit checks by most employers for employment decisions. The final version of AB 22 is at: http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/ab_22_bill_20110920_enrolled.pdf.

Introduced by Assembly Member Paul Fong (D-Mountain View), AB 1236, the Employment Acceleration Act of 2011, pertains to E-Verify, a free web-based system operated by the government that allows U.S. employers to verify the work authorization of newly hired employees by checking information on the Employment Eligibility Verification Form I-9 with Department of Homeland Security (DHS) and the Social Security Administration (SSA) databases. AB 1236 prohibits “the state, or a city, county, city and county, or special district, from requiring an employer other than one of those government entities to use an electronic employment verification system except when required by federal law or as a condition of receiving federal funds.” AB 1236 adds Article 2.5 (commencing with Section 2811) to Chapter 2 of Division 3 of the Labor Code, relating to employment:

Article 2.5.  Electronic Employment Verification Systems

2811.  This article shall be known and may be cited as the Employment Acceleration Act of 2011.
2812.  Except as required by federal law, or as a condition of receiving federal funds, neither the state nor a city, county, city and county, or special district shall require an employer to use an electronic employment verification system, including under the following circumstances:
   (a) As a condition of receiving a government contract.
   (b) As a condition of applying for or maintaining a business license.
   (c) As a penalty for violating licensing or other similar laws.
2813.  For purposes of this article, the following terms have the following meanings:
   (a) “Electronic employment verification system” means an employment verification system that allows employers to electronically verify workers’ employment authorization with the federal government. This includes the Basic Pilot Program, enacted by Section 404 of Public Law 104-208 and renamed in 2007 as the E-Verify Program, and other pilot programs for electronic employment eligibility confirmation. The term “electronic employment verification system” does not include the I-9 Employment Eligibility Verification form or any other employment eligibility systems that are required by federal law.
   (b) “Employer” means an employer other than the state, or a city, county, city and county, or special district.

To read AB 1236, the Employment Acceleration Act of 2011, visit: http://leginfo.ca.gov/pub/11-12/bill/asm/ab_1201-1250/ab_1236_bill_20110909_enrolled.pdf.

For more information about background checks and E-Verify, visit Employment Screening Resources (ESR) – a nationwide background check company accredited by the National Association of Professional Background Screeners (NAPBS) and Designated E-Verify Employer Agent – at http://www.ESRcheck.com and http://www.esrcheck.com/formi9.php.

About Employment Screening Resources (ESR):
Employment Screening Resources (ESR) literally wrote the book on background screening with “The Safe Hiring Manual” by ESR founder and CEO Lester Rosen. ESR streamlines the screening process and reduces administrative overhead though its proprietary technology solutions.  ESR is accredited by The National Association of Professional Background Screeners (NAPBS®), a distinction held by less than two percent of all screening firms. This important recognition was achieved by successfully passing a third party audit demonstrating compliance with the NAPBS Background Screening Agency Accreditation Program. By choosing an accredited screening firm like ESR, employers know they have selected an agency that meets the highest industry standards. For more information about ESR, visit http://www.ESRcheck.com.

Sources:
http://gov.ca.gov/news.php?id=17276.
http://gov.ca.gov/news.php?id=17275.
http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/ab_22_bill_20110920_enrolled.pdf.
http://leginfo.ca.gov/pub/11-12/bill/asm/ab_1201-1250/ab_1236_bill_20110909_enrolled.pdf.