California has become the latest state to limit employers’ ability to run credit checks on job applicants.
Under a new law, employers are prohibited from conducting these checks except for managerial and law-enforcement positions, jobs requiring regular access to confidential information or more than $10,000 in cash, and jobs requiring the employee to make financial transactions on the employer’s behalf.
Similar laws have now been enacted in Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington, and have been proposed in about 10 other states.
In addition, the federal Equal Employment Opportunity Commission recently issued a warning that credit checks could be illegal if they lead to the disproportionate exclusion of women, minorities or other protected groups.
Many employers run credit checks on candidates for jobs that involve financial responsibility, but some run checks on all candidates, believing that employees with good credit are more likely to be reliable, responsible and honest.
According to the Society for Human Resources Management, some 60% of businesses now run credit checks on at least some job applicants, up from 42% five years ago. About 13% of employers run credit checks for every job.