For Background Checking compliance news, be sure to read the latest issue of The Sterling Sentinel!

California Employers Ability To Obtain & Use Credit Reports Greatly Restricted Effective January 1, 2012

Effective January 1, 2012, California joins Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington as states which impose significant restrictions on an employer’s ability to obtain a credit report on an employee or applicant for employment purposes. California Assembly Bill (“A.B.”) 22, signed by Governor Jerry Brown earlier this week, generally only permits employers who are seeking to fill specific enumerated “exempt” positions to obtain and use credit reports to screen applicants and/or current employees. The use of the credit reports in other occupations generally is prohibited. Further, employers will be required to provide a specific disclosure setting forth the specific basis permitting the employer to obtain a credit report.

Specifically, credit reports may only be obtained if the position to be filled falls into one of eight “exempt” categories:

• Positions with the state Department of Justice;
• Managerial positions, i.e. employees who qualify for the “executive exemption” under California wage and hour law, meaning an individual who is an exempt executive whose primary duty is the management of two or more people;
• Sworn peace officers or other law enforcement personnel;
• Positions where the information sought in the credit report must be revealed by law;
• Positions that involve regular access to the personal information of others (i.e., bank or credit card account information, social security numbers, dates of birth) other than the regular solicitation of credit card applications at a retail establishment;
• Positions requiring the employee to be a named signatory on the employer’s bank or credit card or otherwise authorized to enter into financial contracts on behalf of the employer;
• Positions involving access to confidential or proprietary information of the employer; and
• Positions that involve regular access to $10,000 or more in cash.

Credit reports also may be obtained for employees of financial institutions subject to Sections 6801-6809 of the United States Code. Technically such businesses are not required to disclose the statutory support for obtaining a credit report.

Connecticut becomes the 6th state restricting the use of credit reports effective October 2011.

Connecticut Governor Malloy signed legislation (S. B. 361) on July 13th, 2011 that generally prohibits employers from using credit reports in making employment decisions regarding applicants for employment or existing employees. The law, effective on October 1, 2011, applies to all employers in Connecticut that have at least one employee

Under the law, employers may not require an employee or prospective employee to consent to a credit report, subject to the following exceptions:

• The employer is a financial institution, as defined under the law.
• The report is required by law.
• The employer reasonably believes the employee has engaged in specific activity that constitutes a violation of the law related to the employee’s employment.
• Such report is substantially related to the employee’s current or potential job, or the employer has a bona fide purpose for requesting or using information in the credit report that is substantially job-related and is disclosed in writing to the employee or applicant.

Under the fourth exception, the report is “substantially related to the employee’s current or potential job” and allowable if the position:

• Is a managerial position that involves setting the direction or control of a business, division, unit or an agency of a business.
• Involves access to customers’, employees’ or the employer’s personal or financial information, other than information customarily provided in a retail transaction.
• Involves a fiduciary responsibility to the employer, as defined under the law.
• Provides an expense account or corporate debit or credit card.
• Provides access to certain confidential or proprietary business information, as defined under the law.
• Involves access to the employer’s nonfinancial assets valued at $2,500 or more, including, but not limited to, museum and library collections and to prescription drugs and other pharmaceuticals.

Sterling will be updating their consent forms to include all State specific language. The revised consent forms will be provided in the near future, well ahead of the start of the new laws in Maryland and Connecticut.

Indiana Law Imposes New Restrictions on Information That Can Be Acquired As Part of A Criminal Background Check

Effective July 1st 2011, Indiana law allows an individual to restrict access to their criminal record in the following situations:

• Arrests that did not result in convictions due to charges being dismissed or being acquitted at trial
• Vacated convictions
• Convictions for misdemeanors or Class D felony cases that did not result in injury to a person.

The time frame in which an individual can seek to impose such restricted access is dependent on the record that is sought to be restricted:

• An individual who is not prosecuted becomes eligible to seek such restriction 30 days after charges are dismissed, if the charges are not refilled
• An individual who is acquitted becomes eligible to seek such restriction 30 days after the acquittal
• A person who the charges were vacated against becomes eligible to seek such restriction one year after the final order of vacatur, if no appeal pending or the certification of the vacatur decision
• An individual may seek such restriction for a conviction 8 years after they have met all obligations of their sentence.

Effects on employers

Employers may be unable to acquire some information that they currently receive. However, with the exception of the convictions, such information, such as vacated convictions and arrests that did not result in convictions, generally should not be used for disqualification decisions. If a court orders a person's records to be restricted under this chapter, the person generally may legally state on an application for employment or any other document that the person has not been arrested for or convicted of the felony or misdemeanor recorded in the restricted records. House Enrolled Act No.1211

Philadelphia Fair Criminal Record Screening Standards Ordinance

The Philadelphia "Fair Criminal Record Screening Standards Ordinance" was signed into law by Philadelphia Mayor Michael Nutter on April 18th, and becomes effective on June 17, 2011.  Similar to recent legislation in Massachusetts, the Ordinance prohibits employers that employ 10 or more persons within the City of Philadelphia from asking criminal history questions on job applications and prior to or during the first interview.

As a result, covered Philadelphia employers may no longer ask on their employment applications whether an applicant has ever been arrested or convicted of a crime. However, such inquires can be made following a first interview.  For purposes of the Ordinance, "interview" is defined as "any direct contact by the employer with the applicant, whether in person or by telephone, to discuss the employment being sought or the applicant's qualifications."  If any information is voluntarily disclosed during the first interview, the employer may ask questions regarding the conviction history.

The Ordinance also makes it an unlawful discriminatory practice to inquire about or take any adverse action against a person on the basis of an arrest or criminal accusation that is not then pending.

Consistent with existing Pennsylvania standards, Philadelphia employers should make employment decisions based on a criminal background only to the extent that such information is job related.

Violations of the Ordinance are subject to fines of $2,000 per violation.

Maryland Job Applicant Fairness Act

Effective October 1, 2011, Maryland employers generally are prohibited from using an applicant's or employee's credit report or credit history as a basis for denial of employment, discharge or determining compensation or other terms, conditions or privileges of employment.  Maryland has now joined Hawaii, Illinois, Oregon and Washington in imposing such limitations on private sector employers' ability to use such information in making employment decisions.
The prohibition does not apply to employers that are financial institutions, state-approved credit unions, investment advisors registered with the Securities and Exchange Commission, and companies that are required by federal law to examine credit history data. However, an employer who uses a credit report under an exemption must disclose its use of the information in writing to the employee or applicant.

Violations are subject to fines of up to $500 for a first offense and up to $2,500 for any subsequent violation.  Further, since the Act states Maryland public policy, any employee who is denied employment or terminated may file the equivalent of a wrongful termination or a failure-to-hire suit and seek compensatory and punitive damages.

There is also an exemption for use of credit information that is "substantially job-related."  The law does not define "substantially job-related," but it recognizes certain jobs as exempt under the law. 

Exempt positions include:

• Managers and/or those who have the authority to set the direction or control of a business or a department, division, unit, or agency of a business.
• Those that involve access to personal information of a customer, employee, or employer (including an individual's first and last name, and his or her social security number, driver's license number, or financial account number).  However, a position that involves access solely to personal information that is customarily provided in retail transactions is not exempt.
• Those that involve a fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money, or enter into contracts.
• Those that are provided an expense account or a corporate debit/credit card.
• Those that have access to trade secrets, proprietary or confidential business information.

New York State Search Court Fee Increase

Please be advised that the New York State Office of Court Administration has implemented a price increase for Criminal History Record Searches effective July 1, 2010. An additional $10.00 search fee will be added per name. This court cost increase will be reflected in your July Sterling invoice. Should you have any questions, please contact us at 877-424-2457 or please contact your Sterling representative.