On July 13, 2011, Connecticut Governor Malloy signed legislation that will generally prohibit employers from using credit scores in making employment decisions. The Act, which goes into effect on October 1, 2011, prohibits many employers from requiring employees or prospective employees to consent to a request for a credit report as a condition of employment.

The Act applies to employers engaged in business with at least one employee. Certain employers, however, are excluded from the Act's coverage. Various financial institutions, as well as employers who are required to inquire into an applicant's or employee's credit history under federal or state law, are excluded from the Act's prohibitions.

The Act also provides limited exceptions that allow employers to request or use credit information where a credit report is "substantially related to the employee's current or potential job." This exception generally applies to those positions involving money-handling and other confidential job duties. For instance, employers may request credit information for employees in managerial positions that involve the direction and control of the business; employees who have access to financial information; employees with fiduciary duties to the employer; employees who have an expense account or corporate debit or credit card; employees with access to an employer's nonfinancial assets valued at $2,005 or more (i.e., museum and library collections, prescription drugs, and other pharmaceuticals); and employees with access to confidential or proprietary business information. Notably, where an employer chooses to request credit information pursuant to the substantial purpose exception, it must disclose its intent to do so in writing to the employee or applicant.

Connecticut joins Hawaii, Illinois, Maryland (effective October 1, 2011), Oregon, and Washington as states that currently have prohibitions on the use of credit history in employment decisions. (See previous alerts for Illinois, Maryland, and federal law.) Like Maryland's newly-enacted law, Connecticut's legislation does not provide a private right of action. Instead, individuals who feel that an employer has violated the Act must file a complaint with the Labor Commissioner, who will subsequently investigate the matter. If a violation is found, the Commissioner may assess a civil penalty of $300 for each violation.

Several other states currently have legislation pending, along with the federal H.R. 231: Equal Employment for All Act, seeking to restrict employers' use of credit reports. Because of this quickly-changing legal landscape, employers should evaluate their policies against using such information in employment decisions.

Pamela Devata is a partner in Seyfarth's Chicago office and Jeffrey Sand is an associate in the firm's Atlanta office. If you would like further information please contact your Seyfarth Shaw LLP attorney or pdevata@seyfarth.com or jsand@seyfarth.com.