Many employers research a job applicant’s credit history as part of the background check undertaken prior to hiring. There are some good reasons why employers may want to do this. An employee with a bad credit history may not be as responsible as one with a good history. If you decide to investigate a job applicant’s credit history, you should be aware that certain laws govern the use of credit reports in employment decisions.
One of these laws is the federal Fair Credit Reporting Act. This law imposes limitations on the use of credit reports from credit reporting agencies when making employment decisions. Prior to obtaining a credit report to use when making an employment decision, an employer must:
1. Make a written disclosure to the job applicant that the employer may access their credit report. This disclosure must be made in a separate document—it cannot be made on the employment application.
2. Obtain the written authorization of the job applicant prior to requesting his or her credit report.
3. Provide proof to the credit reporting agency that the employer has complied with steps 1 and 2, and that the information is being used for a lawful purpose, and that any adverse action taken as a result of the report will result in a copy of the report and a list of the consumer’s rights provided to the applicant.
Employers should also be aware of the Illinois Employee Credit Privacy Act. This state law only applies to Illinois employers, and prohibits private employers from taking negative employment action against a job applicant or an employee based on that person’s credit history. Importantly, this law does not apply to public employers like local governments.
If you want to be sure that you are in compliance with the laws governing the use of credit history for employment purposes, contact an experienced attorney.