Many hospitality employees not only have access to large sums of money, but also have access to customer and guest credit card information and, in the case of lodging employers, access to guest rooms and personal effects. Given this, many employers subject applicants, and in some cases current employees, to background checks. As such, employers should be aware that Illinois has joined several other states in limiting an employer’s use of credit information.

Additionally, there is a new rule under the FACT Act that requires certain provisions be in effect for employers who provide information to background check companies about former or current employees (i.e., when giving employment verification information).


The Fair and Accurate Credit Transactions Act (FACT Act) recently updated the Fair Credit Reporting Act (FCRA) to require that companies have a policy in place to verify the “accuracy” and “integrity” of information - including employee information - they provide to Consumer Reporting Agencies (CRAs). This will not apply when an employer is requesting a background check on an applicant or an employee; rather, it will apply when an employer is furnishing or providing information about a applicant or employee to a third party. A common example of this practice is when an employer is providing an employment verification or reference. Additionally, the rule states that companies must also have a specific policy stating that an individual can dispute information that is provided directly with the company, and gives specific parameters as to what investigation an employer must undergo.

Any hospitality company that provides information to a CRA regarding a customer, supplier or vendor is covered. Employers who do not have a policy compliant with the FACT Act should do so immediately.

Illinois Joins Three Other States in Restricting the Use of Credit Information; California May Be Next

Effective January 1, 2011, the Illinois Employee Credit Privacy Act: (i) restricts many employers from using an applicant’s or employee’s credit history or other credit information as a factor in any employment decision (e.g., hire, discharge, terms of employment); (ii) restricts employers from inquiring into an applicant’s or employee’s credit history or obtaining a credit history report from a consumer reporting agency and (iii) restricts use of a broad range of credit information regardless of the source of such information. There are certain exceptions, however, for specific positions such as instances where the information is related to a “bona fide occupational requirement” for a particular position or group of employees. Illinois joins Oregon (effective July 1, 2010), Washington, and Hawaii in restricting the use of credit information. On August 31, 2010, the California Assembly approved a similar bill restricting the use of credit reports on employees conducting background checks unless such information is substantially job related for an employee who has access to company money or assets, trade secrets, or other confidential information. Governor Schwarzenegger has vetoed two similar bills in the past, so this bill may not become law.

Hospitality employers with facilities in states with these laws need to take steps to insure that their background check processes comply. Click here to read a more detailed management alert on this new Illinois law.