Connecticut Governor Dannell P. Malloy has signed new legislation (S.B. 361) which will prohibit most employers from utilizing applicant and employee credit reports for employment decisions effective October 1, 2011. The law specifies employers may not require an employee or prospective employee to consent to a request for a credit report unless: (1) such employer is a financial institution, (2) such report is required by law, (3) the employer reasonably believes that the employee has engaged in specific activity that constitutes a violation of the law related to the employee's employment, or (4) such report is substantially related to the employee's current or potential job or the employer has a bona fide purpose for requesting or using information in the credit report that is substantially job-related and is disclosed in writing to the employee or applicant.
The law defines credit report information as “substantially related” if the position:
- Is a managerial position which involves setting the direction or control of a business, division, unit or an agency of a business;
- Involves access to customers', employees' or the employer's personal or financial information other than information customarily provided in a retail transaction;
- Involves a fiduciary responsibility to the employer, including, but not limited to, the authority to issue payments, collect debts, transfer money or enter into contracts;
- Provides an expense account or corporate debit or credit card;
- Provides access to (i) confidential or proprietary business information, or (ii) information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that: (I) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from the disclosure or use of the information; and (II) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; or
- Involves access to the employer's nonfinancial assets valued at two thousand five dollars or more, including, but not limited to, museum and library collections and to prescription drugs and other pharmaceuticals.
Employers who violate these guidelines shall be liable to the Labor Department for a $300 civil penalty for each inquiry made in violation of the law, and employers should consider revising their current policies to align with the new provisions. Please note that Hawaii, Illinois, Maryland, Oregon, and Washington are the other states that have similar restrictions pertaining to the utilization of credit report information for employment decisions.
The Fair Credit Reporting Act (FCRA) authorizes the use of credit report information for employment purposes; however, the proper use of this information within the hiring decision process is imperative to avoid discrimination and legal liability. As best practice, employers should always review credit report information on an individual basis, per applicant, and only as it relates directly to the specific job function. EBI advises employers to meet with legal counsel to review compliance guidelines on the use of credit reports within their state.
All information contained herein is provided by Employment Background Investigations solely for the convenience of its clients. EBI is not providing legal advice or counsel and nothing provided within this article should be deemed as legal guidance or advice. Readers should consult with their own legal counsel to determine their legal requirements or if they have questions on any information provided by EBI.
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