Assembly Bill 22, which becomes effective January 1, 2012, amends Civil Code Section 1785.20.5 and adds Labor Code Section 1024.5 to restrict the use of pre-employment credit reports.
Under the provisions of the new law, pre-employment consumer credit reports are prohibited and can be obtained and used in hiring only if the prospective employee holds one of eight categories of positions:
- A managerial position (defined as a position that qualifies for the executive exemption from overtime);
- A position involving access to confidential and proprietary information, including trade secret information;
- A position involving regular access to $10,000 in cash or more belonging to the company or a client of the company;
- A position in which the employee would be a named signatory on the company's bank or credit account or would be authorized to transfer money on behalf of the employer or to enter into financial contracts for the employer;
- A position involving regular access to a single person's bank or credit card information, Social Security numbers, and date of birth (other than routine solicitation and processing of credit card applications);
- A position for which the law requires such information;
- A position as a sworn police officer or other law enforcement officer; or
- A position in the state Department of Justice.
Positions that are exempt under the administrative or professional exemptions will not fall within the "managerial position" exemption to enable the employer to obtain and consider a credit report on an applicant (unless the position would also qualify under the executive exemption). A person employed in an executive/managerial capacity is one whose duties and responsibilities involve managing the business, who customarily and regularly directs the work of at least two other full-time employees (or the equivalent), who customarily and regularly exercises discretion and independent judgment, and who has authority to make employment decisions or whose opinion in such matters holds particular weight. Employees must also meet a minimum monthly salary requirement of no less than twice California's minimum wage for full-time employment to fall within the executive exemption. See Cal. Tit. 8, § 11040.
The new law specifically exempts national banks, federal branches, and agencies of foreign banks and their subsidiaries, as well as member banks of the Federal Reserve System, banks insured by the Federal Deposit Insurance Corporation (and their subsidiaries), and savings associations insured by the Federal Deposit Insurance Corporation (and their subsidiaries) from its prohibition on pre-employment credit reports. See 15 U.S.C. § 6805.
Practically speaking, the exemptions in the statute will limit its effect. Nevertheless, employers will be required to abandon the use of pre-employment credit checks for positions that do not meet one of the eight exceptions.