Yesterday, I discussed some pending federal legislation that would expand the FMLA to cover part-time employees. Now, I hear that another bill introduced in the U.S. House of Representatives, known as the Equal Employment for All Act, would amend the Fair Credit Reporting Act to prohibit the use of consumer credit checks against prospective and current employees for the purposes of making adverse employment decisions.
A copy of the Act and more details on employer credit checks after the jump…
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You can download a copy of the Equal Employment for All Act here.
This legislation comes as a shot to business groups, many of whom regard credit checks as a safeguard against hiring people who may have trouble with money for positions of trust that involving the handling of money. According to a 2012 SHRM survey, among organizations that initiate credit background checks, 87 percent do so for positions with financial responsibilities.
Although critics of credit checks tout misuse, that risk is mitigated by protections already built into the FCRA. That is, if an employer takes an adverse employment action based on information in a consumer report, it must notify the applicant or employee, as well as advise of the right to see information being reported and to correct inaccurate information.
Further, anti-discrimination laws also provide another potential avenue for employees who believe that employers are misusing credit checks to pursue redress. And some states have already passed laws forbidding the use of credit checks in employment decisions.
Moreover, credit checks are rarely used in the early phases of the interview process. Rather, they generally enter into the hiring equation near the end. According to the 2012 SHRM survey, among organizations that initiate credit background checks, 58 percent do so after making a contingent job offer and 33 percent after the job interview. Thus, very few applicants for a particular opening are affected.
Although fewer employers than in previous years utilize credit reports as a hiring tool, proponents can cite enough pros and safeguards to outweigh the cons.
I suspect that the Equal Employment for All Act will not become law.