BILL ANALYSIS Ó
AB 22
Page 1
Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 22 (Mendoza) - As Amended: March 8, 2011
Policy Committee: JudiciaryVote:6-4
Labor 5-1
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill prohibits an employer from using a consumer credit
report for employment purposes, except:
1)Where the information contained in the report is substantially
job related, meaning that the position has access to money,
other assets or confidential information; and
2)If the person for which the information is being sought is a
manager, a position in the Department of Justice, a sworn
peace officer or other law enforcement position, a position
for which the information contained in the report is required
to be disclosed by law or to be obtained by the employer.
3)If the person or business is subject to the federal
Gramm-Leach-Bliley Act (governing financial institutions) and
the person or business is subject to compliance oversight by a
state or federal regulatory agency with respect to those laws.
FISCAL EFFECT
Minor annual costs (less than $50,000) to the Division of Labor
Standards Enforcement within the Department of Industrial
Relations to investigate complaints regarding potential
violations of the bill's provisions.
COMMENTS
1)Background . Credit reporting activities are regulated by
federal and state law. The federal Fair Credit Reporting Act
(FCRA) regulates how employers may use consumer reports. For
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example, the FCRA requires that the employer notify the
applicant and obtain consent for the background check. If an
adverse decision is made based upon the background check, the
employer must provide the applicant notice of the adverse
decision and the name, address, and telephone number of the
consumer reporting agency making the report. The employer is
also required to give the employee a copy of the report and
information on how to dispute the contents of the report.
California's Consumer Credit Reporting Agencies Act (CCRAA),
the state's counterpart to the FCRA, generally regulates
consumer credit reporting agencies. Among other things, the
CCRAA requires every consumer credit reporting agency to allow
a consumer, upon request and with proper identification, to
visually inspect all files pertaining to him or her that the
agency maintains at the time of the request. The CCRAA
permits consumers to dispute inaccurate information and
requires a consumer credit reporting agency to reinvestigate
disputed information without charge.
In the past, generally only banks and financial service
companies routinely ran credit checks on potential employees.
But employers in other sectors increasingly are including
credit checks in the screening process presumably to assess
applicants' honesty and integrity, among other traits.
2)Purpose . Supporters (several labor unions and consumer
organizations) argue that a person's credit score says nothing
about their character or ability to do a job effectively and
responsibly. Second, they note that credit reports often
contain errors that could negatively impact innocent subjects
of those reports. Third, supporters contend the use of credit
reports for employment purposes disproportionately impacts
female and minority workers typically concentrated in low-wage
jobs. Finally, several proponents assert that it is
particularly unfair to allow employers to perform credit
checks on job applicants in the midst of such a severe
economic downturn.
3)Opposition . A coalition of business interests argue that,
while an individual's credit history by itself is not
predictive of potential theft, access to credit information
can reveal patterns that may present an unreasonable risk to
businesses resulting from an irresponsibility with regard to,
or inability to, handle personal financial commitments. The
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opposition further asserts that this bill prohibits employers
from performing their due diligence in screening applicants,
thus subjecting employers to a greater risk of inadvertently
violating the law or being subject to frivolous employment
litigation. This risk is compounded by the fact that, in most
situations, employers are liable for the actions of employees
in the performance of their job duties, so an employee may
take actions that bring an unacceptable level of liability on
their employer.
4)Prior legislation . This measure is similar, but not identical
to, AB 482 (Mendoza) of 2010, AB 943 (Mendoza) of 2009, and AB
2918 (Lieber) of 2008, all of which were vetoed by Governor
Schwarzenegger, who in general argued that current law
provides adequate protection for employees in this regard and
that the bills increase businesses' exposure to civil actions
over the use of credit checks and increase administrative
costs to employers who must legitimately use credit reports as
a screening tool.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081