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Your Employee Matters


By July 1, 2010No Comments

For many years, we’ve recommended that employers conduct credit histories on all job applicants and post-hire in specific categories. The fact is, someone with a poor credit history is a greater risk than someone who has a good record. However, to protect workers impacted by the recession, Oregon, Washington, and other states have begun passing laws that narrow the scope of these inquiries. The EEOC is also raising numerous concerns in this area. The Oregon statute limits the inquiry to cases in which a person’s credit is “substantially job-related,” which is defined as:

  • 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. Financial information customarily provided in a retail transaction includes information related to the exchange of cash, checks, and credit or debit card numbers.
  • The position at issue is one for which an employer is required to obtain credit history
    as a condition of obtaining insurance or a surety or fidelity bond.

Click here to see the Oregon statute.

Here’s what the EEOC says:

“Pre-Employment Inquiries and Credit Rating or Economic Status
“Inquiry into an applicant’s current or past assets, liabilities, or credit rating, including bankruptcy or garnishment, refusal or cancellation of bonding, car ownership, rental or ownership of a house, length of residence at an address, charge accounts, furniture ownership, or bank accounts generally should be avoided because they tend to impact more adversely on minorities and females. Exceptions exist if the employer can show that such information is essential to the particular job in question.”

Here’s some data gathered in an effort to encourage these regulations.
Here’s a suit filed by the EEOC. Since at least 2001, the EEOC said, Freeman has rejected job applicants based on their credit history and if they have had one or more of various types of criminal charges or convictions. The EEOC lawsuit charged that this practice has an unlawful discriminatory impact because of race, national origin, and sex, and is neither job-related nor justified by business necessity.
Click here to see the FTC site on credit rating.

The Bottom Line: Asking for credit backgrounds poses risks for employee and employer alike. Make sure that you work with a company such as that helps keep you abreast of the rapidly changing legal requirements in this area.