BILL ANALYSIS Ó
AB 22
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CONCURRENCE IN SENATE AMENDMENTS
AB 22 (Mendoza)
As Amended September 1, 2011
Majority vote
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|ASSEMBLY: |45-29|(May 19, 2011) |SENATE: |21-17|(September 8, |
| | | | | |2011) |
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Original Committee Reference: JUD.
SUMMARY : Prohibits, except as specified, an employer or
prospective employer from using a consumer credit report for
employment purposes. Specifically, this bill :
1)Prohibits an employer or prospective employer from using a
consumer credit report for employment purposes, unless the
position of the person for whom the report is sought is any of
the following:
a) A managerial position.
b) A position in the state Department of Justice.
c) A sworn peace officer or other law enforcement position.
d) A position for which the information contained in the
report is required by law to be disclosed or obtained.
e) A position that involves regular access, for any purpose
other than the routine solicitation and processing credit
card applications in a retail establishment, to the bank or
credit card information, social security number, and date
of birth of any one person.
f) A position in which the person is, or would be, a named
signatory on the bank or credit card account of the
employer.
g) A position in which the person is or would be
authorized, on behalf of the employer, to transfer money or
enter into financial contracts.
h) A position that involves access to confidential or
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proprietary information, including trade secrets, as
defined.
i) A position that involves regular access to cash totaling
$10,000 or more of the employer, a customer, or client,
during the workday.
2)Expands existing written notification requirements for any
person using a credit report for employment purposes to also
include identification of the specific basis for use of the
report pursuant to these provisions.
3)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.
4)Defines, for purposes of this act, the term "consumer credit
report" to have the same meaning as defined in Civil Code
Section 1785.3(c), but does not include a report that a)
verifies income or employment; and, b) does not include
credit-related information, such as credit history, credit
score, or credit record.
5)Defines, for purposes of this act, the term "managerial
position" to mean an employee covered by the executive
exemption set forth in Wage Order 4 of the Industrial Welfare
Commission, as specified (8 California Code Regulations
11040).
The Senate amendments clarify that a consumer credit report may
not be used for employment purposes unless the position for whom
the report is sought falls into one of several categories,
including newly established categories for positions involving
regular access to certain personal information, cash totaling
$10,000, proprietary information (i.e., trade secrets), or
involving the authority to conduct certain financial
transactions on behalf of the employer. In addition, the
amendments expand a required written notice and clarify two key
definitions for the purpose of this act.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version approved by the Senate.
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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 these provisions.
COMMENTS : This bill seeks to prohibit the use of consumer
credit reports for employment purposes unless the position
sought falls into at least one of several categories specified
by the bill, including 1) a managerial position (as defined
under Wage Order 4 of the Industrial Welfare Commission), 2) a
peace officer, 3) a position in the Department of Justice, or 4)
a position where the information in the report is required by
law to be disclosed or obtained. Additional categories of
positions, as established by recent amendments, include 5) a
position that involves regular access to specified personal
information for any purpose other than the routine solicitation
and processing of credit card applications in a retail
establishment, 6) a position in which the person is or would be
a named signatory on the employer's bank or credit card account,
or authorized to transfer money or enter into financial
contracts on the employer's behalf, 7) a position that involves
access to confidential or proprietary information, as specified,
or 8) a position that involves regular access to cash of $10,000
or more of an employer, customer or client, during the workday.
In addition, this bill requires any person using a credit report
for employment purposes to identify the specific basis for use
of the report within the existing written notification that is
currently sent to the subject of the credit report alerting him
or her to the fact that a credit report will be used. Finally,
this bill exempts from these provisions banking and financial
institutions already subject to privacy requirements under
federal law.
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%.
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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 research that bolsters their contention that
credit reports should not be used for employment purposes
because they are too often inaccurate. For example, 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, a Texas
Department of Insurance study in 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
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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
FN: 0002733