Philadelphia prohibits use of credit checks in employment screening

Posted in credit checks, credit checks in employment

As of July 7, 2016,  employers in Philadelphia are no longer permitted to obtain or use credit information regarding employees and job applicants.

Signed into law by Philadelphia Mayor Jim Kenney, the new legislation makes it illegal for employers to use the credit information of Philadelphia job applicants or employees – unless covered by an exception – for employment decisions such as hiring, firing, or promotion.

Exceptions include:

• to any law enforcement agency or financial institution;
• to the City of Philadelphia with respect to efforts to obtain information regarding taxes or other debts owed to the City;
• if such information must be obtained pursuant to state or federal law;
• if the job requires an employee to be bonded under City, state, or federal law;
• if the job is supervisory or managerial in nature and involves setting the direction or policies of a business or a division, unit or similar part of a business;
• if the job involves significant financial responsibility to the employer, including the authority to make payments, transfer money, collect debts, or
• enter into contracts, but not including handling transactions in a retail setting;
• if the job requires access to financial information pertaining to customers, other employees, or the employer, other than information customarily provided in a retail transaction; or
• if the job requires access to confidential or proprietary information that derives substantial value from secrecy.

If you have any questions as to if or how this new legislation might affect you, our team will be happy to help.

Calif. courts disagree about how to proceed with some background checks

Posted in background check, background screening company, credit checks in employment

Two different courts have provided two different rulings about how California employers deal with investigative background checks, providing little clarity for other companies that may want to conduct screening in the state.

First Student Inc. was sued by one of its employees, Eileen Connor, after the company bought out Laidlaw Education Services, for which Connor was a school bus driver. First Student had notified its acquired employees that it would be requesting an “investigative consumer report” on each employee. That consumer report was to contain dates of previous employment, credentials, educational background, records of drug and alcohol use, and information “relating to the employee’s character, general reputation … and qualifications for potential employment.”

Connor sued under the California Investigative Consumer Reporting Agencies Act (ICRAA), because First Student had not obtained her written permission before conducting any background screening, whether for a credit or character report. Meanwhile, First Student requested summary judgment due to the ICRAA being “unconstitutionally vague” because the ICRAA was not clear whether it only applied to questions of credit reporting or if it applied to an employee’s character report.

The first court agreed with First Student, in that the law was too vague to be upheld, and also that it conflicted with another, similar law. Connor appealed this decision and the appeals court determined that, regardless of the ambiguity of the ICRAA, First Student did not have the right to conduct basic background screening (including criminal records and employment history) without Connor’s written permission.

The case is now back at trial court.

Because there is so much ambiguity in the law when it comes to background checking, your best bet is always to hire a background screening company when making hiring decisions, as they are the most likely to be versed in your state or region’s screening laws. To learn more about what a background screening service can do for your business, contact Mind Your Business.

Why do employers check credit?

Posted in credit checks, credit checks in employment, employment, employment background screening, employment credit checks

In light of New York City’s decision to ban all employment credit checks this past spring, we thought it would be a good idea to revisit that question: Why DO employers check credit scores for potential employees, and what information do they get when they pull a credit report?

First of all, when an employer pulls a credit report, they don’t actually see an individual’s credit score. Instead, they are provided with a sheet of information called the credit report, which includes names the candidate has gone by, addresses, and information about their credit history, including bankruptcies and whether or not they have previously made payments on time. Pulling this report will not ding an applicants’ credit, but employers do have a few responsibilities to the potential employee. Businesses should be cautious and work with a background screening company to make sure they are not in violation of any state or federal laws before beginning the screening process.

There are two big reasons that employers might want to check a job applicant’s credit report:

1) To determine if the person is a good fit for the job he or she is applying for.

This is especially true if your applicant is considering a position in which he or she will have access to company finances, financial records, company credit cards, or other insider financial information. Employers might run a credit report to make sure that an applicant’s credit history does not indicate that there may be concerns with the applicant taking on this kind of role, so as to protect the company from financial fraud or embezzlement.

2) To verify past employment.

One thing that is not commonly known about a credit report is that it can sometimes contain a candidate’s previous work history, including company names and addresses. This is a great way for companies to review an applicant’s past jobs and confirm that the applicant is not committing resume fraud by lying about previous experience, especially if conducted early in the process (well before reference checks would be considered).

For more information about why employers might conduct credit checks, or to learn what information you’d have access to with a credit check, contact Mind Your Business.

Reminders for employers regarding Fair Credit Reporting Act compliance

Posted in credit checks, credit checks in employment, Federal law

Employers need to be aware of potential legal pitfalls when conducting credit checks on job applicants. More and more employers have fallen victim to lawsuits brought on by former applicants for violating the Fair Credit Reporting Act, a federal law that requires employers to take specific actions when conducting credit checks in order to allow job applicants a fair chance at the position for which they are applying.

As a reminder, here are a few items you must do in your efforts to comply with the Fair Credit Reporting Act. 

1) Check your state, county and city laws.

If you are considering conducting credit checks on potential hires — or already do so — review the laws for your area, or hire a background screening company to review what laws you must comply with, before you begin. Every employer in the United States must comply with the Fair Credit Reporting Act, but cities, states and counties may have additional laws that must be followed as well. (For instance, New York City recently banned pre-employment credit checks altogether.) It’s good to know what you must comply with before determining or updating a credit-checking policy for your business.

2) Put the consumer report disclosure on its own page in the job application.

Several employers have come under fire — including Michaels craft stores and Dollar Tree — for not providing adequate disclosure about credit checks. Employers must provide written warning in a way that stands out from the rest of the job application. Employers are legally required to put this disclosure on its own page in the job application, separatel from any other information (including at-will notices), and this disclosure must be signed by the applicant separately before the company can conduct any screening.

3) Get your paperwork in order.

If for some reason, the results of the consumer report preclude an applicant from being hired, the employer must provide a copy of the consumer report to the applicant, as well as notice that adverse action is to be taken. The applicant must then be provided with a reasonable period of time (at least five business days is fairly standard), during which he or she may dispute errors in the credit report. The employer must also provide a statement of the applicant’s rights under credit-checking laws, and if no errors are found in the credit report, the employer must provide a second adverse-action notice.

For more information about ensuring your business’ compliance with the Fair Credit Reporting Act, including what documents your company needs, contact Mind Your Business.

New York City passes pre-employment credit-check ban

Posted in credit checks, credit checks in employment, pre-employment background checks

The Big Apple may have just passed the strictest pre-employment credit checking law in the country. In a 47-3 vote, the New York City Council passed a bill preventing employers in the city from running credit checks on job applicants.

“Millions of Americans who have bad credit would also be great employees,” said Brad Lander, who sponsored the bill. “What they need to repair their credit is a job, and to make it harder for them to get a job is the definition of unfair.”

Credit reports are often said to provide information that is often irrelevant for employers to know during the hiring process, and that conducting these kinds of checks allows employers to more easily discriminate against people of color, as well as those struggling financially or those with health problems. (According to studies by Demos, more than 50 percent of those with poor credit scores have medical debt that adversely affects their score, and that “predatory lending schemes” have predominately targeted non-white communities, increasing the number of defaults and foreclosures for these communities.)

However, others believe that credit reports are an important part of the pre-employment process, as they paint a picture as to whether an individual can be trusted to, say, manage a company’s finances.

Regardless, there will be a few exceptions to the New York City ban: if state or federal law requires a credit check for a position, the employer may still conduct one. Employers in fields related to law enforcement and national security may still have credit checks conducted, as will those who work in roles with “financial agreements valued at $10,000 or more” and those with access to “trade secrets.”

The law is expected to go into effect in August, though enforcement will be difficult; enforcement will be via complaint, and it will be up to workers to report violations to the law.

41 NYC Council members want to end this pre-employment practice

Posted in credit checks, credit checks in employment, pre-employment background screening

More than two-thirds of New York City’s 51 Council members are on board with a bill to ban credit checks during pre-employment background screening, unless credit checks are required by federal or state law.

Council member Brad Lander sponsored the bill — called the Stop Credit Discrimination in Employment Act — which argues that credit checks are more likely to screen out black and Hispanic applicants, even though there is little indication that a credit report can predict a person’s likelihood to commit financial crimes. The Council says credit checks should be eliminated in order to give all candidates a fair chance, including minority populations and recent college graduates, who may have taken on debt and haven’t had an opportunity to make good, real-world credit decisions.

While some jobs do require credit checks by law — including some jobs in the financial sector — the Council also wants to make sure that there are not widespread exemptions added to the bill, which would negate the good the Council is attempting. Some states have included exemptions in similar legislation for employers in the insurance industry or law enforcement, as well as for those who have access to company credit cards or expense accounts.

NYC Mayor Bill de Blasio’s office has indicated support of the bill, while also stating that there may be instances in which exemptions should be made.

A similar bill was floated in 2013, but did not pass New York’s City Council.

Don’t take credit-report screening advice for granted

Posted in credit checks in employment, employment background screening, employment credit checks, Federal law

It was more than six months ago when craft retailer Michaels was allegedly informed that it needed to move its background check disclosure statement on its job applications. Michaels was allegedly told by consumer reporting agency General Information Services Inc. that it needed to put that disclosure on a separate document, as it was “included on the same page as … where a job applicant may record his or her previous work experience, 10 notices of state laws … and various other statements.”

Despite the warning, the retailer failed to complete this action, and now finds itself in the midst of a lawsuit for allegedly breaking state and federal laws.

The case is brought forth by New Jersey’s Christina Graham, who applied to work at the craft store last June. The plaintiff states that Michaels is in violation of New Jersey’s Fair Credit Reporting Act, as well as the federal Act, both of which mandate that employers disclose that they intend to conduct credit report checks during the background check process on a document that is separate from the rest of the employment application.

Graham hopes to win damages not only for herself, but also for all Michaels applicants in any state over the previous two years that was subject to background and/or credit checks without being properly informed, as well as every New Jersey resident who applied to Michaels over the previous six-year time period and was put through the same types of background checks.

There is no indication that the Equal Employment Opportunity Commission is involved in Graham’s lawsuit.

photo credit: JeepersMedia via photopin cc

NYC considers ban-the-box legislation more stringent than most for employers

Posted in background checks, ban the box, credit checks in employment, criminal background check, criminal record, employment background screening

In mid-December, the New York City Council introduced a proposal for the city’s own ban-the-box laws, just months after it introduced a bill that would prevent city employers from using credit checks against job candidates. (That bill is still being debated.)

Over the previous years, employers in the state have not been able to refuse to hire a potential employee based on his or her criminal record unless an extensive analysis concluded that the criminal offense would directly affect the candidate’s ability to complete the job description, according to New York Correction Law. The new ban-the-box directive expands on that even further.

Under the new proposal, New York City employers would have to remove the “criminal history” question on any job applications. Employers would also not be able to conduct background checks of any type until a conditional employment offer had been extended to that candidate.

Even then — if this bill is passed — once background checks had been conducted, employers may not revoke a job offer if the candidate was convicted of a felony more than 10 years ago or convicted of a misdemeanor more than five years ago, even if the charge was related to something in the job description for the position the candidate is being offered.

This bill is one of the strictest pieces of ban-the-box legislation in the country for employers, and would provide former convicts with the greatest opportunity to re-enter the work force. It will be interesting to see if — or how — the bill transforms during the legislative process, and how the law will be applied.

Study: credit score an indicator of personal health, not just financial

Posted in credit checks, credit checks in employment, employment credit checks

A new study entitled “Credit scores, cardiovascular disease risk, and human capital” was released in the December issue of Proceedings of the National Academy of Science, in which researchers studied more than 1000 people for almost 40 years to determine if heart health and personal finances could be correlated.

Employers often use credit reports to assess the risk of hiring a new employee; landlords and insurance companies often do the same, to provide an assessment of an individual’s value as a tenant or insured.

While risk factors, education, and abilities and skills were taken into account during the study, researchers concluded that low credit scores can be negatively linked to heart health, while high credit scores are indicative of “better job performance, safer driving and better health.”

“What it comes down to is that people who don’t take care of their money don’t take care of their health,” said Terrie Moffitt, the leader of the study.

The goal of the study was to determine what correlation, if any, there was between heart health and credit scores, and to help make people aware that they must make lifestyle changes to help improve both their personal and financial health.

Of course, one-time negative credit events and health problems are also linked; major illnesses can cause a lower credit score due to an increase in medical bills, stress due to unemployment can lead to illness, and unexpected life events can also cause financial or physical distress. The study found that a person’s “heart age” increases by 13 months every time his or her credit score drops 100 points.

FICO announces new credit scoring system for medical debt

Posted in credit checks, credit checks in employment

Employers may now need to take a closer look at potential employees’ credit reports, as credit-scoring company Fair Isaac Corporation (FICO) has announced plans to revise the way it reports medical debts that have been sent to collections.

One third of Americans find themselves stuck with medical debts. The new system, also known as “FICO 9,” would take existing outstanding medical debts that have been sent to collections and weight them to be of lesser value on a credit report than debts such as student loans or credit cards that have gone to collections. Because of this, those with outstanding medical debts, but little other debt, may actually see an improvement in their credit score number.

In addition, medical debts that had previously been sent to collections, but that have since been paid off, will be erased from one’s credit score with FICO 9. This could result in credit score increases of up to 25 points, according to Cathy Curtis of the National Association of Personal Financial Advisors. (A statement that says a medical bill was sent to collections will remain on the report for seven years, however, even though the score number would not be affected; seven years is the standard for credit reporting.)

The system previously used, dubbed “FICO 8,” weighted all debts equally, regardless of the type of debt or how it was acquired. FICO 9 will alter that, because becoming ill or injured should not have the same employment or financial repercussions as racking up thousands of dollars in credit card debt. Employers will be able to see the difference in the types of debt under FICO 9’s reporting when looking at job applicants’ credit reports.

However, even with FICO 9’s improvements, everyone should still check their credit reports every year to ensure accuracy and file a correction if they notice any inaccuracies. In addition, if a medical debt has been sent to collections incorrectly and it pops up on the credit report, contact the medical office and credit bureau to have the debt investigated; even though medical debt will be weighted differently, it can still drag a score down if left on the report when it should not be there.

Employers should also be aware that they may have to ask for FICO 9 reports specifically, as many companies and mortgage lenders are still using FICO 8 and even FICO 7 as their primary scoring models.

photo credit: urbanbohemian via photopin cc