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Florida, Michigan and Montana recently joined 15 states that are considering limits to employers’ use of credit reports in hiring and other employment decisions.

 

Similar bills are being considered by state legislatures in California, Georgia, Connecticut, Indiana, Maryland, Kentucky, Missouri, New Jersey, Nebraska, New York, New Mexico, Ohio, Texas, Pennsylvania and Vermont. Check back frequently for the latest updates on those bills.

 

By contrast, New Jersey is currently considering a law that would allow employers to share an employee’s or former employee’s credit history, work evaluations and other information in the personnel file with prospective employers or government agencies.

 

In the last three years Washington, Hawaii, Oregon and Illinois have passed laws limiting the use of credit reports in hiring. A similar bill failed to pass in Colorado.

 

In most of these states, the limits to an employer’s use of credit checks apply to all employment decisions. However, the Florida and Michigan bills would only restrict use of credit history in hiring. An employer could still use a credit report for employment decisions regarding current employees.

 

In Florida, Senate Bill 1562 would make use of credit scores an “improper employment practice” unless the information directly relates to the position applied for. Credit checks would still be permitted in certain industries, including banking and financial services. Credit information could also be used in making a decision about hiring certain exempt or management employees with fiscal responsibilities.  However, the employee’s credit ranking could not be the determining factor in making the hiring decision. The law would be enforced under the state equal opportunity codes.

 

In Michigan, House Bill 4363 would permit the use of a credit report only for employees at banks, securities firms, casinos or insurance offices. Employers hiring a CPA could also consider credit information. The applicant would have the right to sue the employer and recover damages.

 

Montana’s proposed law, House Bill 601, would limit the use of credit reports for current employees as well as applicants. Violations would carry a penalty of $250 for the first offense and up to $500 for subsequent offenses.

 

Many states are taking measures to limit the use of credit history in hiring. Due to the economic recession, many employees have foreclosures or collections on their credit history. The fear is that those blemishes will slow recovery by  discouraging employers from hiring unemployed workers.

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