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New California Law Prohibits Employers from Denying Job Applicants Based on Credit History

Posted on January 3, 2012

Following precedent set in Illinois, Washington and Maryland among others, California has enacted a law prohibiting employers from rejecting job applicants based on their credit profiles.

Taking effect on Jan. 1, Assembly Bill 22 took more than three years to come to fruition, with the two prior attempts being vetoed by former Gov. Arnold Schwarzenegger.

The bill was authored by Assemblyman Tony Mendoza of Artesia who said he was inspired to write this law after his constituents expressed concern that they were being treated unfairly by the practice of screening credit reports as part of pre-employment background checks.

Companies that utilized the practice have claimed that it helps determine how reliable and trustworthy a candidate is, which has largely been refuted and disproven by recent studies. In this economy, it’s not uncommon for a person or family to rely on cards to help make it through the month, which can quickly raise their credit utilization percentage and thus bring down their credit score, regardless of whether they pay the card off in full by the end of the billing cycle.

There are, however, numerous exemptions to this law. Law enforcement positions, including police officers and positions at the State Department of Justice, are not restricted by the legislation, as well as managerial jobs, occupations with access to more than $10,000 in cash or positions that have easy access to information that could be used to commit identity theft.

Like many hiring laws, discrimination is harder to prove than the law makers had probably intended it to be. For instance, federal law prohibits discrimination based on age, gender, religion, race or sexual preference, but proving a case of any of these would take real evidence and not merely an assumption, something that is not readily available to those outside of the company.

As such, in regards to this new law for Californians and citizens the other states that have adopted similar legislation, it is still recommended that people work to improve their credit standing regardless of whether they’re currently seeking employment or not.

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