(March 24, 2011) A bill banning most employers from using consumer credit reports for employment purposes passed an Assembly committee on Tuesday.

The California Chamber of Commerce-opposed AB 22 (Mendoza; D-Norwalk), which unfairly limits employers’ ability to use consumer credit reports for legitimate employment purposes, unless the information in the report is “substantially job-related.” The bill narrowly defines that term to refer only to managerial positions; employees of the state Department of Justice; law enforcement; certain financial institutions; or a position for which a report is required by law.

Measuring Reliability

Employers normally use credit reports when narrowing an applicant pool during the hiring process, CalChamber Policy Advocate Jennifer Barrera told the Assembly Judiciary Committee on March 22.

CalChamber Policy Advocate Jennifer Barrera testifies against AB 22. Photo by Megan Wood

The reports provide objective information about an individual, confirming identification, employment history, collection or delinquency status, and overall management of the person’s finances. These elements, Barrera said, allow employers to gauge a person’s trustworthiness and overall responsibility before offering an applicant employment.

Police departments make use of credit reports for similar reasons.

“The U.S. Police Jobs website, as well as the California Commission [on Peace Officer Standards and Training] website, suggests that irresponsibility in financial management is indicative of problematic behavior,” Barrera told the committee.

Narrow Exemptions

While AB 22 still allows some entities to use credit reports, the bill bans use of the reports in nearly all areas of the private job sector.

“[AB 22 allows] an employer to pull a credit report for a managerial position who has direct access to financial information assets and property,” Barrera said. “But what that fails to recognize is that there are numerous positions in the private sector that are non-managerial positions that have direct access to financial information, cash, confidential information, and assets of the employer and the public.”

Thus, not only does AB 22 impede employers from gauging the trustworthiness and responsibility of a job candidate, it also puts employers and the public’s financial information at risk.

Key Vote

AB 22 passed Assembly Judiciary on a vote of 6-4 on March 22.

Ayes: Atkins (D-South Park/Golden Hill); Dickinson (D-Sacramento); Feuer (D-Los Angeles); Huffman (D-San Rafael); Monning (D-Carmel); Wieckowski (D-Fremont).

Noes: Silva (R-Huntington Beach); Huber (D-El Dorado Hills); Jones (R-Santee); Wagner (R-Irvine).

AB 22 will be considered next by the Assembly Labor and Employment Committee.

Staff Contact: Jennifer Barrera