BILL ANALYSIS Ó
AB 22
Page 1
ASSEMBLY THIRD READING
AB 22 (Mendoza)
As Amended May 12, 2011
Majority vote
JUDICIARY 6-4 LABOR & EMPLOYMENT
5-1
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|Ayes:|Feuer, Atkins, Dickinson, |Ayes:|Swanson, Alejo, Allen, |
| |Huffman, Monning, | |Furutani, Yamada |
| |Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Wagner, Silva, Huber, |Nays:|Miller |
| |Jones | | |
| | | | |
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APPROPRIATIONS 11-6
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|Ayes:|Fuentes, Blumenfield, | | |
| |Bradford, Charles | | |
| |Calderon, Campos, Davis, | | |
| |Hall, Hill, Lara, | | |
| |Mitchell, Solorio | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Donnelly, Gatto, | | |
| |Nielsen, Norby, Wagner | | |
| | | | |
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SUMMARY : Prohibits, except as specified, the use of consumer
credit reports for employment purposes. Specifically, this
bill :
1 Prohibits an employer from using a consumer credit report, as
defined in Civil Code Section 1785.3(c), for employment
purposes unless:
a) The information contained in the report is substantially
job-related, meaning that the position has access to money,
other assets or confidential information; and,
b) The position of the person for whom the report is sought
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is any of the following:
i) A managerial position;
ii) A position in the state Department of Justice;
iii) A sworn peace officer or other law enforcement
position; or,
iv) 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 (GLB)
(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.
3)Defines, for purposes of this act, the term "managerial
position" to mean a position held by a person who has
authority, in the interest of the employer, to hire, transfer,
suspend, lay off, recall, promote, discharge, assign, reward,
or discipline other employees, or responsibility to direct
them or to adjust their grievances, or effectively to
recommend such action, if in connection with the foregoing the
exercise of this authority is not of a merely routine or
clerical nature, but requires the use of independent judgment.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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 : This bill seeks to ban 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 must be either managerial, in the
state Department of Justice, a sworn peace officer, or one in
which the information in the report is required to be disclosed
by law or to be obtained by the employer. Finally, this bill
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also would exempt financial institutions already subject to
existing privacy requirements under federal law.
Because the bill requires both criteria to be met in order for a
credit report to be used for an employment purpose, its
limitation on the use of credit reports is more restrictive than
if only one of the two criteria were sufficient to authorize
such use. In other words, not only must the information in the
credit report rise to the level of "substantially job-related,"
as defined, but the position sought must also fall into one of
the four categories specified by the bill: a peace officer, a
position in the Department of Justice, a position where law
requires disclosure of the information, and, finally, a
"managerial position," defined as a position held by a person
who, in the interest of the employer, has certain authority or
responsibilities, as specified, that are not merely routine or
clerical in nature but that require use of independent judgment.
For many years, mainly banks and financial service companies ran
routine credit checks on potential employees, but data indicates
that employers in other sectors increasingly are including
credit checks in the screening process presumably to assess
applicants' honesty and integrity, among other traits.
According to the sponsor, the California Labor Federation, data
shows that in 1998 only 25% of employers researched the credit
history of job applicants, but by 2006 that figure had reached
43% and currently stands at 60%.
Supporters of the bill, including many labor unions, worker
rights advocates, consumer advocates and the American Civil
Liberties Union (ACLU), make several arguments for the policy of
prohibiting the use of credit reports for employment purposes.
First, supporters contend that a person's credit score says
nothing about his or her character or ability to do a job
effectively and responsibly. Second, they warn that credit
reports often contain errors that may seriously impact innocent
subjects of those reports. Third, supporters contend that the
use of credit reports for employment purposes disproportionately
impacts female and minority workers typically concentrated in
low-wage jobs. Finally, considering these factors, 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."
Supporters point to two studies that bolster their contention
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that credit reports should not be used for employment purposes
because they are too often inaccurate. First, they cite a Texas
Department of Insurance study from 2004 that found that 25% of
credit reports have errors serious enough to result in the
denial of credit to the subject of the report. In addition,
supporters cite a 2007 Zogby survey reporting that 37% of people
surveyed had found an error in their credit report and half of
these respondents indicated that they could not easily fix the
mistakes. Proponents also contend that many events outside an
individual's control, such as identify theft, data breaches,
negligence by credit reporting agencies, and the improper sale
of credit information can also result in damaging misinformation
appearing on an individual's credit report through no fault of
their own.
Supporters contend that the use of credit reports for employment
purposes disproportionately impacts female and minority workers
typically concentrated in low-wage jobs. For example, the same
Texas study from 2004 found that the average credit score of
African Americans is roughly 10 to 35% lower than whites, while
the average score for Latinos is roughly 5 to 25% lower than
whites. According to supporters, this evidence suggests that
employer policies that potentially exclude workers based on
credit reports have a disparate impact on African Americans and
Latinos even though these credit reports are rarely job-related.
Supporters also note that, for this reason, the Equal
Employment Opportunity Commission (EEOC) has expressed concern
about the potential racial disparate impact of the use of credit
reports for employment purposes.
A coalition of credit reporting agencies, business associations,
and manufacturing groups strongly oppose this measure. These
opponents argue that an employee's credit report can provide
valuable information regarding an applicant's overall
responsibility, reliability, and integrity, which can help
employers reduce future litigation and loss. The coalition
contends that these desired employee characteristics are not
unique to financial institutions or police officers, but are
values that all employers seek when determining whether to hire
an applicant.
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334
AB 22
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