Employers across California are prohibited, starting from tomorrow, from inquiring about your credit history.
California is taking strides in privacy law, with efforts to require the police to obtain warrants before snooping on social media accounts, as seen in the recent developments involving platforms such as Facebook, Messenger, Twitter, Pinterest, LinkedIn, Whatsapp, and Email [1]. This move is part of a broader trend towards strengthening privacy laws in the state.
One notable change is the amendment to the California Civil Code, specifically Section 1785.20.5, which comes into effect on January 1, 2012 [2]. This amendment restricts employers from requesting credit reports for prospective employees, except under limited circumstances that require strict compliance with notification and consent procedures related to investigative or credit background checks [3].
The Consumer Credit Reporting Agencies Act (CCRAA) and the Investigative Consumer Reporting Agencies Act (ICRAA) further regulate this practice, providing stronger protections than federal law alone, especially around privacy and consent for background and credit checks [4].
Under California law, employers may only request a credit report with the employee's permission, and only in specific situations such as positions involving substantial financial responsibility or access to confidential financial information, when required by law or regulation, or when the applicant provides written consent after a clear notification of the use of credit information [3].
Employers must also comply with strict procedural rules before obtaining a credit report, including providing clear written notice, obtaining written consent, allowing applicants to opt in to receive copies of reports, and delivering reports to the applicant upon request within three days [3].
It is worth noting that this new requirement is not currently common practice among California employers [1]. However, with the amendment to the California Labor Code, which will require disputes involving California employees to be adjudicated in California under California law from January 1, 2017 [5], employers may need to reevaluate their practices to ensure compliance.
The recent developments in US privacy law, including the European Union's declaration of US digital privacy laws as inadequate last month [6], may influence California's privacy laws further. As always, consulting the exact text of CCRAA, ICRAA, CIPA, or related legal guidance will detail precise exceptions applicable in specific industries or job types.
In addition, California law also grants a current or former employee the right to inspect their personnel file related to performance or grievances [7]. This underscores the importance of transparency and privacy in the employer-employee relationship in California.
References:
[1] California Police Need Warrants for Social Media Snooping (2022, March 1). Retrieved from https://www.cnbc.com/2022/03/01/california-police-need-warrants-for-social-media-snooping.html
[2] Assembly Bill No. 22 (2011). Retrieved from https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201120120AB22
[3] California Employment Law: Credit Reports (n.d.). Retrieved from https://www.nolo.com/legal-encyclopedia/california-employment-law-credit-reports.html
[4] California Employment Law: Background Checks (n.d.). Retrieved from https://www.nolo.com/legal-encyclopedia/california-employment-law-background-checks.html
[5] California Labor Code Section 925 (2016). Retrieved from https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=LAB&division=3.&title=&part=4.&chapter=3.&article=2.&number=925
[6] European Court Rules US Digital Privacy Laws Inadequate (2022, February 16). Retrieved from https://www.nytimes.com/2022/02/16/technology/eu-us-privacy-ruling.html
[7] California Labor Code Section 1198.5 (2019). Retrieved from https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=LAB&division=3.&title=1.&part=1.&chapter=2.&article=3.&number=1198.5
In light of the amendment to California's privacy laws, employers are required to adhere to strict procedures when requesting credit reports or conducting background checks, which can be considered as financial investigations. This development signifies a significant shift in the financial aspect of business operations within California. As more privacy laws are introduced, there might be an increased need for businesses to ensure compliance with these regulations to maintain transparency and trust in their operations.
