BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 943|
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THIRD READING
Bill No: AB 943
Author: Mendoza (D), et al
Amended: 7/9/09 in Senate
Vote: 21
SEN. LABOR & INDUSTRIAL RELATIONS COMM. : 4-2, 6/25/09
AYES: DeSaulnier, Ducheny, Leno, Yee
NOES: Wyland, Hollingsworth
SENATE JUDICIARY COMMITTEE : 3-2, 7/7/09
AYES: Corbett, Florez, Leno
NOES: Harman, Walters
SENATE APPROPRIATIONS COMMITTEE : 8-5, 8/24/09
AYES: Kehoe, Corbett, Hancock, Leno, Oropeza, Price, Wolk,
Yee
NOES: Cox, Denham, Runner, Walters, Wyland
ASSEMBLY FLOOR : 49-30, 5/28/09 - See last page for vote
SUBJECT : Employment: credit reports
SOURCE : Author
DIGEST : This bill bans the use of consumer credit
reports in employment, unless two criteria are met. First,
the information in the credit report must be substantially
job-related, where the applicant or promotion candidate
would have access to money, other assets, or confidential
information. Second, the position sought is either
CONTINUED
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managerial, a sworn peace officer, a position in a city or
county government, or the information is already required
by law. This bill also exempts financial institutions
already subject to existing privacy requirements under
federal law.
ANALYSIS : Existing federal and state law limits the use
of credit information for employment purposes. Under the
existing California Consumer Credit Reporting Agencies Act
(CCRAA), a credit report in the employment context is
defined as any written, oral or other communication of any
information by a consumer credit reporting agency (CRA)
bearing on an individual's credit worthiness, credit
standing or credit capacity. The consumer credit report is
used (or is expected to be used) for the purpose of serving
as a factor in establishing an individual's eligibility for
(a) personal, family, or household purposes, or (2)
employment purposes, or (3) hiring of a dwelling unit, as
specified, or (4) for other purposes as specified.
"Employment purposes," when used in connection with a
consumer credit report, means a report used for the purpose
of evaluating a consumer for employment, promotion,
reassignment, or retention as an employee. (Civil Code
Section 178.3)
The existing federal Fair Credit Reporting Act (FCRA) was
enacted to promote accuracy, fairness, and privacy of
personal information assembled by consumer credit reporting
agencies. (15 U.S.C. Sections 1681 et seq.) The FCRA
places restrictions on an employers' ability to use credit
reports for employment purposes by regulating how employers
may use consumer reports. The FCRA does not exempt
employers from complying with state law governing
background checks.
If information from a credit report is used for employment
purposes, the FCRA requires that the employer:
1.Make a clear and conspicuous written disclosure to the
applicant before the report is obtained, as specified,
that a consumer report may be obtained.
2.Obtain prior written authorization from the applicant.
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3.Certify to the CRA that the employee disclosed and
obtained authorization to review the credit report and
disclosed to the applicant that the information will not
be used in violation of any federal or state
equal-opportunity law or regulation, as specified.
4.Before taking an adverse action based on the credit
report, provide the person with notice of the adverse
decision and the name, address, and telephone number of
the consumer reporting agency making the report. In
addition, the employer is required to give the employee a
copy of the credit report, a summary of FCRA rights with
information on how to dispute the contents of the report,
and other documents as specified. (15 U.S.C. Section
1681 et seq.)
The existing California Consumer Credit Reporting Agencies
Act (CCRAA), the state's counterpart to the FCRA, generally
regulates consumer credit reporting agencies and requires
every consumer credit reporting agency to allow a consumer,
upon request and with proper identification, to visually
inspect all the files pertaining to him or her that the
agency maintains at the time of the request. (Civil Code
Section 1785.1 et seq.) The CCRAA allows consumers to
dispute inaccurate information on a consumer credit report
and requires a consumer credit reporting agency to
reinvestigate disputed information without charge.
The existing federal Gramm-Leach-Bliley Act (prohibits
financial institutions from disclosing a consumer's
nonpublic personal information to a nonaffiliated third
party unless the financial institution (1) provides the
consumer with a clear and conspicuous disclosure of the
financial institutions' specified privacy polices and
practices, (2) gives the consumer the opportunity to stop
the disclosure before the information is initially
disclosed (opt-out), and (3) provides the consumer with an
explanation of how to exercise his or her rights to
opt-out. (15 U.S.C. Section 6801 et seq.)
This bill prohibits an employer, except as specified, from
obtaining a consumer credit report for employment purposes.
Specifically, this bill:
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1.Prohibits the use of a consumer credit report for
employment purposes unless:
A. The information contained in the report is
substantially job-related, meaning that the position
of the person for whom the report is sought has
access to money, other assets, or confidential
information.
B. The position of the person for whom the report is
sought is a position in the Department of Justice, a
managerial position, a position in a city, county, or
both city and county, that of a sworn peace officer
or other law enforcement position, or a position for
which the information contained in the report is
required to be disclosed by law or to be obtained by
the employer.
2.Provides that these provisions do not apply to a person
or business subject to the federal Gramm-Leach Bliley Act
(governing financial institutions) and implementing
regulations, if the person or business is subject to
compliance oversight by a state or federal regulatory
agency with respect to those laws.
Comments
Currently, employers frequently use credit reports to
evaluate job applicants for employment opportunities.
There are three national reporting agencies, TransUnion,
Equifax, and Experian, which often provide credit
information to employers through intermediary companies.
In the past, generally only banks and financial service
companies routinely ran credit checks on potential
employees, but today employers in other sectors are
increasingly including credit reports in the screening
process to verify identity, employment history and
presumably to assess applicants' honesty, integrity, and
responsibility, among other traits.
According to the United States Equal Employment Opportunity
Commission (EEOC), as employer credit checks have become
more common over the past several y ears, the EEOC has
reiterated its concern that credit check policies can have
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an unlawful disparate impact in violation of Title VII's
prohibitions against race and national origin
discrimination. According to the EEOC, as early as the
1970s, the Commission issued decisions finding that
employers could violate Title VII by basing employment
decisions on a worker's financial status. (EEOC Testimony,
March 19, 2009) This bill prohibits an employer, with the
exception of certain financial institutions, from obtaining
a consumer credit report for employment purposes, except as
specified.
Prior Legislation
AB 2918 (Lieber), 2007-08 Session . Similar to this bill,
AB 2918 would have prohibited, except as specified, the
user of a consumer credit report from procuring a consumer
credit report for employment purposes unless the
information in the report was either substantially job
related, as defined, or required by law to be disclosed to
or obtained by the user of the report. AB 2918 was vetoed
by the Governor, and in his veto message the Governor
states:
"This bill would significantly increase businesses'
exposure to civil actions over the use of credit
checks. Further, the bill would increase
administrative costs to those employers who must
legitimately use credit reports as a screening tool by
requiring that the employer first abide by its onerous
requirements. California employers and businesses have
inherent needs to obtain information about applicants
for employment. This bill would become a new employer
obstacle to the use of available information needed to
make hiring decisions."
AB 986 (Escutia), 2005-06 Session . AB 986 would have
revised the definition of "employment purposes" to require
that when a consumer credit report or investigative report
is used for employment purposes, the information be
directly related to the skills necessary to perform the
job. This bill was not pursued by the author and it was
never heard in a policy committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
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Local: No
SUPPORT : (Verified 8/26/09)
All of Us or None
American Civil Liberties Union
American Federation of State, County and Municipal
Employees, AFL-CIO
California Alliance for Retired Americans
California Applicants' Attorneys Association
California Commission on the Status of Women
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Immigrant Law Project
California Immigrant Policy Center
California Labor Federation, AFL-CIO
California NOW
CalPIRG
California Professional Firefighters
California Rural Legal Assistance Foundation
California Teamsters Public Affairs Council
Coalition for Humane Immigrant Rights of Los Angeles
Congress of California Seniors
Consumer Action
Consumer Federation of California
Consumers for Auto Reliability and Safety
Consumers Union
Engineers and Scientists of California
International Longshore & Warehouse Union
Legal Services for Prisoners with Children
National Association for the Advancement of Colored People,
California State Conference
National Employment Law Project
National Lawyers Guild, Labor & Employment Committee
Older Women's League of California
Privacy Rights Clearinghouse
Professional & Technical Engineers, Local 21
Service Employees International Union
Strategic Committee of Public Employees, LIUNA California
Labor Federation, AFL-CIO
UNITE HERE!
United Food and Commercial Workers Union, Western States
Council
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United Transportation Union
The Women's Foundation of California
OPPOSITION : (Verified 8/26/09)
Acxiom
Apartment Association, California Southern Cities
Apartment Association of Greater Los Angeles
Apartment Association of Orange County
Associated General Contractors
Association of California Insurance Companies
Association of California Water Agencies
California Apartment Association
California Association of Collectors
California Association of Health Services at Home
California Association of Licensed Investigators
California Chamber of Commerce
California Chapter, American Fence Contractors' Association
California Employment Law Council
California Fence Contractors' Association
California Grocers Association
California Hospital Association
California Hotel & Lodging Association
California Independent Grocers Association
California Manufacturers & Technology Association
California Restaurant Association
California Retailers Association
California Society of Association Executives
Consumer Data Industry Association
Department of Industrial Relations
Engineering Contractors' Association
Experion
Flasher/Barricade Association
Garda, Inc.
International Franchise Association
Irvine Chamber
Life Technologies Corporation
Long Beach Area Chamber of Commerce
Marin Builders' Association
National Armored Car Association
National Federation of Independent Business
Reed Elsevier
Santa Barbara Rental Property Association
Southwest California Legislative Council
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TransUnion
ARGUMENTS IN SUPPORT : Proponents of this bill argue that
working families in California are facing the worst
economic crisis since the Great Depression. Unemployment
in California is now at 11 percent while at the same time
Californians' credit histories are deteriorating due to the
economic downturn and the foreclosure crisis. According to
proponents, in this economic climate particularly, a
person's credit history says nothing about his or her
character or ability to do a job effectively and
responsibly. Yet, proponents argue, employers routinely
rely on credit reports to deny employment to those who
would have otherwise been given a job.
According to the author's office, the Society of Humane
Resource Management has reported that 43 percent of U.S.
employers currently conduct credit checks on job
applicants. Proponents believe that this is unfair, as
there is no evidence of any correlation between credit
score and job performance. In addition, the author's
office states that the EEOC has expressed concern that the
use of credit reports in employment may have a disparate
impact against people of color and women workers who are
concentrated in low-wage jobs. The author's office
believes this bill is needed to ensure that job
opportunities will not be unfairly denied to those hit
hardest by the current economic crisis.
Proponents are also concerned that conducting credit checks
is flawed by the high rate of errors in credit reports as
well as the over reliance on out-dated information about an
individual. In addition, proponents argue that the rise in
identity theft, data breaches, and the improper sale of
credit information, as well as negligence by credit
reporting agencies can all result in damaging information
appearing on an individual's credit report through no fault
of their own. The author's office believes this bill would
provide an important worker protection without placing
unreasonable restrictions on employers.
ARGUMENTS IN OPPOSITION : According to opponents of this
bill, consumer credit reports provide valuable information
to employers in decision-making processes including the
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hiring or promotion of an individual. Opponents argue that
employers work hard to create working environments that are
safe and secure, and believe that this bill inappropriately
limits the use of a consumer credit report and does so at
the expense of the health, safety, and financial security
of California business and their customers.
Opponents argue the need to use information from a credit
report when making employment decisions where the potential
employee would be required to perform a wide variety of
duties that may include access to cash, other assets, or
confidential information. This issue is of particular
concern to the rental housing industry which argues that
many of their employees have significant financial
responsibilities, including the collection of rents and
maintenance of on-site cash flow, yet this bill would
prohibit them from using consumer credit reports when
considering applicants for employment. The rental housing
industry argues that this bill will serve to the detriment
of all tenants and landlords because giving employees, who
have not been property screened with the use of a consumer
credit report, access to confidential financial information
of tenants and prospective tenants could put that
information at risk.
In addition, opponents argue, by restricting access to
consumer credit report information this bill may expose the
business' customers and employees to increased risk such as
identity, financial and asset theft. Opponents state that
employee theft is a growing problem and cite Federal Bureau
of Investigation (FBI) data that demonstrates that employee
theft is the fastest growing crime in the United States and
is expected to increase by 15 percent annually. While a
person's credit history by itself is not predictive of
potential theft, opponents argue that access to credit
information can be used to evaluate an applicant's personal
responsibility and organization skills by their ability to
pay their bills on time and can reveal patterns that may
present an unreasonable risk to businesses.
Lastly, some opponents believe that the exemptions in this
bill will create a new area of confusion and puts employers
at risk of inadvertently violating the law and subjects
them to employment litigation. Opponents also fear that
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this bill will lead to an increase in "retaliation" claims
by individuals claiming that they were not hired or
promoted because he or she failed to authorize the ordering
of a credit report. Overall, opponents believe that for
any employer risk created by this bill represents a major
liability that discourages business growth in California.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans,
Feuer, Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,
Hernandez, Hill, Huffman, Jones, Krekorian, Lieu, Bonnie
Lowenthal, Ma, Mendoza, Monning, Nava, John A. Perez, V.
Manuel Perez, Portantino, Price, Ruskin, Salas, Saldana,
Skinner, Solorio, Swanson, Torlakson, Torrico, Yamada,
Bass
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Duvall, Emmerson,
Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman,
Harkey, Huber, Jeffries, Knight, Logue, Miller, Nestande,
Niello, Nielsen, Silva, Smyth, Audra Strickland, Tran,
Villines
NO VOTE RECORDED: Torres
AGB:cm 8/26/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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