Credit checks and pre-employment background screening

pre-employment background screening process. On the one hand, the employer would like to know whether their potential employee is responsible fiscally; on the other hand, surely someone’s personal finances are their own business? Oregan and Illinois are two states who believe the latter – credit checks are no longer part of the background screening process prior to employment. In July 2010, Oregon’s new law, “The Job Applicant Fairness Act, went into effect. Under the law, employers are prohibited from obtaining or using an applicant’s or an employee’s credit history for the purposes of employment decisions with only limited exceptions for certain employers, including (1) federally insured banks and credit unions, (2) businesses required by law to consider employee credit history, (3) police and other public employers hiring for law enforcement and airport security and (4) business that can demonstrate that the individual’s credit history is “substantially job-related” based on the position for which the individual holds or is being considered. While the law includes an exception when the individual’s credit history is “substantially job-related”, credit history information is “substantially job-related” if an “essential function of the position at issue requires access to financial information not customarily provided in a retail transaction that is not a loan or extension of credit.” In Illinois, the law – the Employee Credit Privacy Act – effective 1/1/11 prohibits employers from ordering credit reports and using them to determine someone’s fitness for employment. The law has several exceptions notably banks, insurers and law enforcement. An employer can also use a credit report if having good credit standing is a BFOQ – bona fide occupational qualification. These states have taken a step to protecting an individuals personal financial situation, and it wouldn’t be surprising if other states follow suit. It will be interesting to see how this develops in 2011.]]>

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