Restrictions on Credit Reports used by Employers

Assembly Bill 22 (“AB 22”), which amends the California Labor Code, generally prohibits an employer from using a credit report for employment purposes.  Prior to the enactment of AB 22, employers in California were permitted to use credit reports for employment purposes if the employer provided written notice.  Under this new law, an employer may use a credit report for employment purposes only if the information contained in the report is substantially job-related.  Information in a credit report is substantially job-related only if the person for whom the report is sought has access to money, other assets, or confidential information.  Furthermore, employers can only  use credit reports for employment purposes for certain categories of employees:  managerial positions; positions in the state Department of Justice; sworn peace officers and other law enforcement positions; and positions for which the information contained in the report is required to be disclosed by law or to be obtained by the employer. 

Sean Graham

Legal Developments