With new restrictions on the use of credit report checks by employers for employment purposes in California set to take effect January 1, 2012, a safe hiring expert speaking on KCBS News Radio in San Francisco about the upcoming credit check regulations said the new law – California Assembly Bill 22 (AB 22) – is unnecessary and confusing.  He further commented that the law essentially standardizes best practices for background checks that employers across the country should be following already.

“The problem with the new California law is that the categories that were created are a little bit ambiguous and it’s unclear who falls into what category,” Attorney Lester Rosen, founder and CEO of Employment Screening Resources (ESR) in Novato, California, a firm which provides pre-employment background screening for employers, told KCBS News. “We argued that the law should have simply stated that the employer has to state a good reason to run a check.”

Rosen, the author of ‘The Safe Hiring Manual,’ a comprehensive guide for employment background checks, and a frequent speaker nationwide on screening issues, added that AB 22 “really standardizes or establishes what already many of us consider to be a best practice, which is credit reports ought to be used sparingly, and only in those situations where there is a nexus or a correlation to the job.”

Introduced by Assembly member Tony Mendoza (D-56th District) and signed into law by Governor Jerry Brown in October of 2011, Assembly Bill 22 prohibits most employers and prospective employers in California – with the exception of certain financial institutions – from obtaining consumer credit reports for employment purposes unless the position of the person for whom the report is sought is one of the following:

  • A managerial position;
  • A position in the state Department of Justice;
  • A sworn peace officer or other law enforcement position;
  • A position for which the information contained in the report is required by law to be disclosed or obtained; 
  • 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;
  • 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;
  • A position that involves access to confidential or proprietary information; or
  • A position that involves regular access to $10,000 or more of cash.

In addition, AB 22 also requires the written notice informing the person for whom a consumer credit report is sought for employment purposes to also inform that person of the specific reason for obtaining the report. With the passage of AB 22, California becomes the seventh and most recent U.S. state to pass a law limiting credit report checks for employment purposes. The other six U.S. states currently with laws restricting credit checks are: Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington.

In a white paper co-authored by Rosen titled ‘Use of Credit Reports in Employment Background Screening,’ the point is made that credit  reports do NOT contain credit scores, and are only  obtained at the very end of the hiring process so an employer can be assured they are not hiring a risky employee. Credit scores are not part of an employment credit report since there is no correlation between a credit score and job performance. 

Rosen has long advised employers to approach credit reports with caution, noting that there can be mistakes and that employers should have a clear business justification –  such as the job includes access to significant cash, assets or it is a fiduciary position.  In some cases, a credit report can well be red flag that protects against embezzlement, identity theft, or other negative workplace issues. 

To download the complimentary white paper ‘Use of Credit Reports in Employment Background Screening’ co-written by Attorney Lester Rosen, visit https://www.esrcheck.com/Download/.
To read California Assembly Bill 22 (AB 22), visit: http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/ab_22_bill_20110920_enrolled.pdf.

To listen to the KCBS radio interview with safe hiring expert Lester Rosen, visit: http://sanfrancisco.cbslocal.com/2011/12/28/california-to-restrict-credit-checks-in-hiring/.

For more information about credit report for consumers, visit https://www.esrcheck.com/Applicant-Resources.php.

For more information about background check services, visit the Employment Screening Resources (ESR) – a nationwide background check firm accredited by the National Association of Professional background Screeners (NAPBS) – at https://www.esrcheck.com/ or call toll free 888.999.4474.


About Employment Screening Resources (ESR):
Founded in 1997 in the San Francisco, CA area,
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 https://www.esrcheck.com or call toll free 888.999.4474. 

About ESR News:
The Employment Screening Resources (ESR) News blog –
ESR News – provides employment screening information for employers, recruiters, and jobseekers on a variety of topics including credit reports, criminal records, data privacy, discrimination, E-Verify, jobs reports, legal updates, negligent hiring, workplace violence, and use of search engines and social network sites for background checks. For more information about ESR News or to send comments or questions, please email ESR News Editor Thomas Ahearn at [email protected].