California Law Restricts Employer Use of Credit Reports

Effective January 1, 2012 private and public employers will be restricted in their use of credit reports and will have specific notification requirements.

Positions Where Credit Reports Are Allowed
An employer or prospective employer cannot use a consumer credit report for employment purposes unless the position of the person for whom the report is sought is any of the following:

  • A managerial position (as defined).
  • A position in the state Department of Justice.
  • That of a sworn peace officer or other law enforcement position.
  • A position for which the information contained in the report is required by law.
  • 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, and c) Date of birth.
  • 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, or c) Authorized to enter into financial contracts on behalf of the employer.
  • 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.
  • 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.

Notice and Disclosure Requirements
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.

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