BILL ANALYSIS
AB 943
Page 1
GOVERNOR'S VETO
AB 943 (Mendoza)
As Amended July 9, 2009
2/3 vote
-----------------------------------------------------------------
|ASSEMBLY: |49-30|(May 28, 2009) |SENATE: |24-14|(September 3, |
| | | | | |2009) |
-----------------------------------------------------------------
-----------------------------------------------------------------
|ASSEMBLY: |49-29|(September 9, | | | |
| | |2009) | | | |
-----------------------------------------------------------------
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;
AB 943
Page 2
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 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
AB 943
Page 3
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
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.
AB 943
Page 4
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.
GOVERNOR'S VETO MESSAGE :
"This bill would prohibit the use of consumer credit reports for
employment purposes unless the information is either
substantially job related, as defined, or required by law to be
disclosed to or obtained by the user of the report.
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."
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0003259