BILL ANALYSIS
AB 943
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 943 (Mendoza)
As Amended July 9, 2009
Majority vote
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|ASSEMBLY: |49-30|(May 28, 2009) |SENATE: |24-14|(September 3, |
| | | | | |2009) |
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Original Committee Reference: L. & E.
SUMMARY : Prohibits, except as specified, the use of consumer credit
reports for employment purposes.
The Senate amendments authorize the Department of Justice to use a
consumer credit report for employment purposes when a person is
applying for a position that has access to money, other assets or
confidential information.
AS PASSED BY THE ASSEMBLY , this bill:
1 Prohibited an employer from using a consumer credit report 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 is
any of the following:
i) A managerial position;
ii) A position in a city, county, or city and county;
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)Provided that these provisions do not apply to a person or
business subject to the federal Gramm-Leach-Bliley Act (governing
AB 943
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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.
FISCAL EFFECT : According to the Senate Appropriations Committee,
this bill will result in up to $120,000 annually in ongoing
enforcement costs, funded by special funds.
COMMENTS : Supporters argue that, particularly in this economic
climate, a person's credit score says nothing about his or her
character or ability to do a job effectively and responsibly.
Nonetheless, employers routinely rely on credit scores to deny
employment to those who would have otherwise been offered
employment.
Supports state that, beyond the impact on the individuals who are
denied work, using credit reports as a barrier to employment is bad
for the economy. It prevents people who have fallen on hard times
from finding a path out of poverty and making a better life for them
and their families. It prevents applicants from being judged on
their merits and it legitimizes discrimination in hiring.
Supporters raise the following specific concerns with respect to the
use of credit reports for employment purposes. First, credit checks
for employment purposes have risen dramatically in recent years and
now 43% of employers perform credit checks on job applicants.
Second, a 2003 study concluded that credit history does not predict
job performance. A foreclosure can cause a drop of 250 points or
more on an individual's credit score, which can significantly
decrease opportunities for credit and employment. In addition, the
use of credit reports in employment may have a disparate impact on
people of color. For example, a Texas study 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. Finally, credit reports are often inaccurate. A
2007 Zogby survey reported 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.
Therefore, supporters argues that as we struggle to repair our
economy and put Californians back to work, this bill provides an
important worker protection without placing unreasonable
restrictions on employers.
Opponents argue generally that consumer credit reports provide
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valuable information to employers in decision-making processes,
including the hiring of an individual.
For example, they state that employee theft is a growing problem and
cite to 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% annually. They contend
that, on average businesses lose as much as two percent of their
sales to employee theft. While a person'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.
In addition, opponents argue that by restricting access to this
information, this bill may expose consumers and other employees to
an increased risk of identify theft as employees who handle personal
information may inappropriately use this financial information.
Employers strive to recruit and retain the best employees who will
help grow their business and increase employment opportunities.
They argue that consumer credit reports provide one aspect of a
potential employee's responsibility. These reports also provide
information that provides verification of an applicant's employment
history.
Finally, opponents argue that the exemptions in this bill will
create a new area of confusion that puts employers at risk of
inadvertently violating the law and subjects them to employment
litigation.
This measure is very similar, but not identical to AB 2918 (Lieber)
from last session. AB 2918 amended the Consumer Credit Reporting
Agency Act to prohibit, except as specified, the user of a consumer
credit report from procuring a consumer credit report for employment
purposes unless the report is either substantially job related, as
defined, or required by law to be disclosed to or obtained by the
use of the report. AB 2918 was vetoed by Governor Schwarzenegger.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0002179