Employers Restricted On Pulling Candidates’ Credit Reports

April 28, 2010 - PRLog -- It is not uncommon for employers to run background checks prior to hiring a candidate.  These checks can include employment history verification, criminal background checks and reference checks.  But when it comes to checking their credit, many candidates may question the necessity of the credit check.  As it turns out, their instinct may be right, as employers can only check their credit under specific circumstances.

The Job-Related Rule

According to a recent article by Tina Harkness with the Mountain States Employment Council, "employers can successfully use credit reports when hiring employees so long as they comply with certain laws and make sure that credit is job-related."

The biggest point in this statement is that the consideration of credit history must be related to the job.  Often  times, this comes down to a cash-handling issue, or circumstances when the new employee may be in charge of the company's finances.

Financial Industry Alone is Not Enough

Just because the job may be involved in the financial services arena does not give the employer the legal back-up to run a credit report for all of their employees.  The job must involve actual interaction with cash or financial transactions.
For example, a receptionist at a high-power CPA firm would not have access to the financial information.  In this case, it is not considered acceptable to run the credit as a condition of employment.

Rules for Employers

Employers must comply with the Fair Credit Reporting Act (FCRA) when running a credit report on a potential or even an existing employee.  This means that they must get permission in writing prior to running the credit report.  If there are items on the report that impact the employer's decision to hire or retain a candidate, they must disclose this to the candidate.

Not even a bankruptcy should be held against a potential employee.  The Bankruptcy Code, at 11 U.S.C. sec. 525(b) states that "No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt."

State laws can also impact how much information the employer can use in the hiring decision.  Some states won't allow the employer to discriminate against  a candidate because of garnishments or court-ordered child support payments that are deducted from the paycheck.

Washington, Hawaii and Oregon recently passed laws forbidding employers to use credit reports in the hiring decision. While Colorado does not have any laws against this yet, check the Colorado Division of Labor and Employment (CDLE) for official notices.

The Law is on My Side - But So What?

Many employers don't realize the legal restrictions on running credit reports on candidates.  This can result in some job seekers feeling like they are pushed in a corner: on one hand, they want the job, but on the other they may not want to disclose something that is protected by law.

If a job seeker finds himself in this situation, he can try reminding the employer of the law.  Even better, be sure to ask them if the job will involve handling cash or being responsible for financial transactions.  If they wonder why you're asking, bring up the facts you know about the FCRA.  By making them aware of recent laws, a candidate could be doing them a favor.

Some employers won't care, and will insist on the credit report no matter what.  Then the question comes down to this: is this job really worth it?  Only the job seekers can answer that question.

DISCLAIMER: I, Donna Shannon,  am not an employment lawyer.  If you find you need professional advice on any hiring or employment issue, consult an attorney.

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Since 2004, Coyote Visions has helped job seekers in a variety of industries through resume services, coaching and job searching classes. Our specialties include private service, career transitions and tools to successfully navigate the hiring maze.