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Pre-Employment Credit Checks Eliminated From Many States

Updated on March 13, 2018
Patty Inglish, MS profile image

Ms. Inglish is a successful Employment & Training pro, setting Midwest regional records with tens of thousands placed in gainful employment.

Credit checks for employment are gradually being eliminated in the United States.
Credit checks for employment are gradually being eliminated in the United States. | Source

Financial Discrimination is Possible via Credit Checks

Credit checks can be discriminatory within the procedures used for pre-employment investigations. This leads to still further financial hardship for those who cannot pass the scrutiny.

These financial-based background checks angered increasing numbers of the long-term unemployed American 2000 - 2013, especially in the aftermath of the Great Recession with its layoffs, downsizings, government bail outs, Stimulus Funding, and more.

Pre-employment credit checks, except for federal government, banking and financial services businesses, and similar should be eliminated.

Analysts have consistently found, from examining many corporate employment records across the country, that a personal credit history containing problems does not correlate with financial/material dishonesty on the job or with poor overall job performance (see the link and videos below for references).

Source

Analysts have consistently found, from examining many corporate employment records across the country, that a personal credit history containing problems does not correlate with financial/material dishonesty on the job or with poor overall job performance

— P. Inglish

US States That Eliminated Pre-Employment Credit Checks by 2016

Pre-employment credit checks are no longer legal in the following states, except for certain financial institutions, defense employers, or similar:

  1. California
  2. Colorado
  3. Connecticut
  4. Delaware
  5. Hawaii
  6. Illinois
  7. Maryland
  8. Nevada
  9. Oregon
  10. Vermont
  11. Washington

Individual cities that passed legislation banning credit checks for employment citywide:

  1. City of Chicago
  2. New York City
  3. City of Seattle, Washington has outlawed employers in the city from using criminal records found in background checks as a reason to deny hiring job candidates as well.

According to a 2016 CareerBuilder survey, only 29 percent of companies currently perform pre-employment credit checks.

— Jason Hanold Blog

US States That Took Action To Begin To Eliminate Credit Checks in Non-Financial Employment Prior To 2013:

  • In the Northeast: New York, New Jersey, Connecticut, Vermont, Maryland, Pennsylvania.
  • In the Midwest: Michigan, Missouri, Ohio, Indiana, Illinois
  • In the South: Florida, Georgia, Kentucky, South Carolina
  • In the South/West: Texas, Colorado, Arizona, New Mexico, Nevada, Arkansas
  • In the West: California, Oregon, Washington, Montana, Nebraska

Mobile Health recommends all businesses to use an employee screening program to attract only the best talent. Credit checks are not vital.

— Virtual-strategy.com; 2013.
Click thumbnail to view full-size
Homless family walks from Phoenix to San Diego in hope of gaining employment in The Great Depression (US 99. Near Brawley, Imperial County). Unwarranted credit checks feel like this to the serious job seeker.
Homless family walks from Phoenix to San Diego in hope of gaining employment in The Great Depression (US 99. Near Brawley, Imperial County).
Homless family walks from Phoenix to San Diego in hope of gaining employment in The Great Depression (US 99. Near Brawley, Imperial County). | Source
Source
Unwarranted credit checks feel like this to the serious job seeker.
Unwarranted credit checks feel like this to the serious job seeker. | Source

Professional Opinions from Workforce Experts

  • America’s Economic Comeback Requires Qualified Candidates for the Job | Virtual-Strategy Magazine -- "As America turns the corner of the recent economic slump, the Dept. of Labor shows that businesses are hiring. Mobile Health recommends all businesses to use an employee screening program to attract only the best talent. Credit checks are not vital." (Reference: virtual-strategy.com/2013/03/11/america%E2%80%99s-economic-comeback-requires-qualified-candidates-job Retrieved 4/15/2013.)

Employment Related Bills Pending in Florida’s 2012 Legislative Session: Senate Bill 102 and House Bill 303 will prohibit employers from directly or indirectly using a job applicant’s personal credit history as a hiring criterion, except where required by law.

— Examiner.com/workplace-issues-in-orlando; 2012

Article: New workplace rules cover credit checks, social media. January 2012. Venture County Star.

  • California employers and employees have a variety of rules to learn with the enactment of new laws that cover credit checks, dress codes, and social media.
  • More than 120 business owners, managers and human resources officials gathered to examine the matter and its possible results.

Possible Proxies for Employment Discrimination

A Deceptive Tactic

In certain states, some companies may be advertising in their job postings that "The unemployed need not apply." A number of agencies have posted that their opinion is that this is also discrimination and EEO actionable, because unemployed applies more frequently in the 2010s to "older workers", "minority race workers", "physically and mentally challenged workers", and perhaps even "female workers."

Thus, "unemployed" in this case is a proxy word for "minority."

Proxy for Other Discriminatory Practices

It is not legal in a job interview to ask where the job candidate lives or with whom, unless the candidate is a minor child. Asking these questions of any adult gives the interviewer some information about the demographics of the job candidate, none of which is to be asked or exposed in the job interview according to labor law/EEO.

A home address is subject to search on a number of real estate company websites and county property records, revealing the average property prices, rental prices, and incomes of local residents. The address can also reveal the ethnic and faith mix of the area, found on Sperling's Best Places. It reveals the percentages of single and married people in the area, educational levels, and other data. Except for educational level (dates not allowed to be asked), all of these questions are illegal.

At least 25 US State Legislatures in 2010 and early 2011 prepared bills with which they planned to ban Pre-Employment Credit Checks in order to end financial discrimination and allow more people to secure employment. Credit checks in these states were considered unfair to laid off workers, those with high medical bills through no fault of their own, and people that lost their homes in the US mortgage and banking disaster of the late 2000s. There is some evidence that suggests that financial discrimination also targets lower-income workers of color and ages over 40 (laid off/downsized). Pre-employment credit checks can, therefore, function as a proxy for discrimination on the basis of income, ethicity/race, and age.

Another, newer, credit check problem is the growing number of people targeted for Identity Theft and its results.

SB 1045 - Job Applicant Fairness Act

In certain states, some companies may be advertising in their job postings that "The unemployed need not apply." A number of agencies have posted that their opinion is that this is also discrimination and EEO actionable.

Credit-Check Lawsuits and Precedent

Individuals applying for promotions in their careers have reported across the Internet that when they checked their credit histories, they found unexpected information. Their employers had run credit checks on them during the period of interviewing for the potential promotions. These individuals felt violated.

Lawsuits have been pressed against credit checks in the following cases:

Loudy Appolon filed a class action suit (Reference: privacyblog.littler.com/2010/12/articles) against the defendant University of Miami and the Leonard M. Miller School of Medicine, stating that these institutions ran credit checks in a way that discriminated against African American and Latino job applicants.

The plaintiff was hired by the schools, quit her job at another university in Miami FL, then was told she could not be hired by the U of M facility, because of her poor credit report. The report was mistaken, she had it corrected, and she was still not hired by U of M. She seems to feel that the credit report reason for non-hire was a proxy for her demographic as African American. Thus, the class action suit (some of the allegations were dismissed by the court in March 2011). This is one of the cases that sets a precedent for Credit-Check Discrimination.

Additional lawsuits of this nature have been filed against such companies as the following, although ruling results are not complete:

  • Freeman, a Dallas convention and corporate events planning company
  • Kaplan HIgher Education Corporation

(Reference: http://www.law.com/jsp/article.jsp?id=1202486450121&slreturn=1&hbxlogin=1)

© 2011 Patty Inglish MS

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