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When you are applying for a job, it goes without saying that a potential employer will likely conduct a pre-employment background check before making a hiring decision. But when an employer asks you to submit information for a consumer credit check during the pre-employment process, it might strike fear in your heart. Perhaps you have been unemployed for a while and your credit has suffered. Or perhaps you made some bad money decisions in the past that have negatively impacted your credit score. If your potential employer uses your credit rating as a factor in hiring, it could cause even more financial problems for you if you are not hired due to your credit.

So can a California employer lawfully check your credit during the hiring process? It may surprise you that sometimes, they actually can.

California Law Prohibiting Credit Checks for Employment

California passed Assembly Bill 22 on September 8, 2011. The law, which went into effect in 2012, prohibits many employers from using consumer credit reports in making employment decisions, such as whether or not to hire someone. That said, California law and the federal Fair Credit Reporting Act (FCRA) both require an employer to give an applicant or employee notice if it plans to check a credit report and use it as the basis for an employment decision. The employer must also notify the applicant or employee when the decision is final. This means that some employees may have the right to recover compensation by filing a lawsuit against an employer that has failed to comply with either of these laws.

Exceptions Permitting California Employers to Request Credit History

California law also recognizes that the nature of certain jobs may require an applicant to release his or her financial history to a prospective employer. Sometimes good credit history can relate directly to a particular position. An employer may use lawful credit checks in the hiring process when:

  • You apply for a managerial position.
  • You apply for a law enforcement or peace officer position.
  • You apply for a position at the California Department of Justice.
  • You apply for a job where the information in the report is required to be disclosed or obtained by law.
  • You apply for a position where you have access to more than $10,000 during a workday.
  • You apply for a position in which you are named a signatory on an employer’s bank or credit card account, or authorized to enter into contracts, or transfer money on behalf of an employer.
  • You apply for a job where you have access to confidential or proprietary information.

However, in general, most California employers are not allowed to check the credit history of a job applicant or employee.

Situations Outside the Scope of California Pre-Employment Credit Check Laws

It is important to note that the ban on using an employee’s or job applicant’s credit report for hiring decisions does not include the standard application questions that concern past income, previous jobs or employee reference checks. That said, your prospective employer may actually reassure you up front and on your application that your credit history will not be sought, but rather, just request the standard background check information.

California Credit Check Laws in Employment: Additional Information

  • California Assembly Bill 22: Full Bill Text
  • California Labor Code Section 1024.5
  • California Joins States Restricting Use of Credit Reports for Employment Purposes via Littler.com
  • New Credit Check Law Takes Effect via HireRight.com

If you find that your employer has unlawfully used credit reports to discriminate against you or others when making hiring decisions, be sure to contact our expert California employment attorneys right away. Free consultation.