BILL ANALYSIS
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THIRD READING
Bill No: AB 482
Author: Mendoza (D)
Amended: 7/15/10 in Senate
Vote: 21
2009 SENATE VOTES NOT RELEVANT
SENATE LABOR & INDUST. RELATIONS COMMITTEE : 4-0, 6/9/10
AYES: DeSaulnier, Ducheny, Leno, Yee
NO VOTE RECORDED: Wyland, Hollingsworth
SENATE JUDICIARY COMMITTEE : 3-1, 6/29/10
AYES: Corbett, Hancock, Leno
NOES: Harman
NO VOTE RECORDED: Walters
SENATE APPROPRIATIONS COMMITTEE : 7-3, 08/02/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
NOES: Ashburn, Emmerson, Wyland
NO VOTE RECORDED: Walters
ASSEMBLY FLOOR : Not relevant
SUBJECT : Employment: credit reports
SOURCE : Author
DIGEST : This bill prohibits an employer, with the
exception of certain financial institutions, from obtaining
a consumer credit report for employment purposes unless the
CONTINUED
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information is (1) substantially job-related, meaning that
the person for whom the report is sought has access to
money, other assets, or trade secrets or other confidential
information, and (2) the position of the person for whom
the report is sought is a position in the Department of
Justice, a managerial position, 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 obtained by the
employer.
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
(1) 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.
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. The FCRA places restrictions on an employer's
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.
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2. Obtain prior written authorization from the applicant.
3. Certify to the CRA that the employer 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 also 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.
The California Consumer Credit Reporting Agencies Act
(CCRAA), which is 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. 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 (GLB) 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 policies 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 right to opt-out.
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 managerial position, a position in the
state Department of Justice, 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.
Prior Legislation
AB 943 (Mendoza), 2009-10 Session, which was vetoed by the
Governor, would have prohibited the use of consumer credit
reports for employment purposes unless the information was
either substantially job related, as defined, or required
by law to be disclosed to or obtained by the user of the
report. AB 482 (Mendoza) is almost identical to last
year's bill, except that AB 482 does not exempt a city,
county, or both city and county from the prohibition of
using a consumer credit report for a position. AB 943 was
vetoed by the Governor, and in his veto message the
Governor stated: "This bill is similar to legislation I
vetoed last year on the basis that California's employers
and businesses have inherent needs to obtain information
about applicants for employment and existing law already
provides protections for employees from improper use of
credit reports. As with last year's bill, this measure
would also significantly increase the exposure for
potential litigation over the use of credit checks."
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AB 2918 (Lieber), 2007-08 Session, which was vetoed by the
Governor and is similar to AB 943, 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.
SB 986 (Escutia), 2005-06 Session, 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. The bill was not
pursued by the author and was never heard in policy
committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
New enforcement Up to $60 Up to
$120 Up to $120 Special*
requirement
* Labor Enforcement and Compliance Fund
SUPPORT : (Verified 8/4/10)
American Civil Liberties Union
California Commission on the Status of Women
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Labor Federation, AFL-CIO
California Teamsters Public Affairs Council
Consumer Action
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Consumer Federation of California
Engineers and Scientists of California
Friends Committee on Legislation of California
International Longshore & Warehouse Union
Los Angeles Mission
National Employment Law Project
Privacy Rights Clearinghouse
Professional & Technical Engineers, Local 21
SEIU California
United Food and Commercial Workers Union, Western States
Council
UNITE HERE!
OPPOSITION : (Verified 8/4/10)
Apartment Association of Orange County
Apartment Association, Southern California Cities
Association of California Insurance Companies
Association of California Life & Health Insurance Companies
Association of California Water Agencies
California Advocates
California Apartment Association
California Association of Licensed Investigators
California Chamber of Commerce
California Chapter of the American Fence Association
Consumer Data Industry Association
California Fence Contractors Association
California Grocers Association
California Hospital Association
California Independent Grocers Association
California Manufacturers & Technology Association
California New Car Dealers Association
California Retailers Association
California Special Districts Association
California State Association of Counties
Consumer Data Industry Association
Corona Chamber of Commerce
Engineering Contractors Association
Experian
First American Corporation
Flasher/Barricade Association
Independent Maintenance Contractors Association
League of California Cities
Life Technologies Corporation
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Marin Builders' Association
National Federation of Independent Businesses
Pacific Association of Building Service Contractors
Regional Council of Rural Counties
Simi Valley Chamber of Commerce
TransUnion
ARGUMENTS IN SUPPORT : Proponents argue that working
families in California are facing the worst economic crisis
since the Great Depression. Unemployment is at a 25-year
high, 500 families lose their homes to foreclosure each
day, and those who have jobs are facing furloughs and wage
cuts. 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 Human
Resource Management has reported that 43 percent of United
States 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 Equal Employment Opportunity
Commission 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
provides an important worker protection without placing
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unreasonable restrictions on employers.
ARGUMENTS IN OPPOSITION : According to opponents,
employers strive to recruit and retain the best employees
who they trust and will help grow their businesses. To
this end, opponents argue, consumer credit reports provide
valuable information to employers in decision-making
processes including the hiring or promotion of an
individual. According to opponents, consumer credit
reports provide important insight into one aspect of a
potential employee's ability to handle responsibility for
cash, other assets, and personal information while at the
same time allowing employers to verify an applicant's
employment history.
Opponents maintain 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. Furthermore,
opponents state that employee theft is a growing problem.
Opponents contend that the United States Chamber of
Commerce rates the annual cost of employee theft at $40
billion. In addition, opponents argue that on average,
businesses lose as much as two percent of sales to employee
theft. Opponents believe that an employee with high
consumer debt who handles cash or assets may be more likely
to steal, but this bill prohibits an employer form
accessing this important information as a part of their
hiring process.
Opponents argue 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. In addition, opponents
believe that by restricting access to important information
found in consumer credit reports; this bill may expose the
business' customers and employees to increased risks such
as identity, financial, and asset theft. 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
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considering applicants for employment.
Overall, opponents argue that this bill unduly restricts
the ability of businesses to use all legally available
information in employment decisions.
PQ:mw 8/4/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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