California is one of the states that limit the circumstances in which employers may use credit reports in making employment decisions. California law requires employers to give notice if they plan to check credit reports, and again if they plan to use the information in the report as the basis for a negative employment decision. (Federal law includes similar requirements.)
However, California goes a step further to prohibit employers from using an applicant’s or employee’s credit report in making job decisions, except for certain positions.
The federal Fair Credit Reporting Act (FCRA) requires employers to get consent before pulling an applicant’s or employee’s credit report. If the employer plans to make a job decision based on information in the report, the employer must notify the employee or applicant in advance, and again when the decision is final. (For more on these requirements, see our article Can Prospective Employers Check Your Credit Report?)
California imposes similar requirements. An employer that wants to request a copy of an employee’s or applicant’s credit report must give the person written notice. The notice must indicate which of the exceptions to the general ban on considering credit information applies (explained below), and must include a box for the person to check if he or she wants a copy of the report. After receiving the report, the employer must provide another notice if it intends to deny the person employment based on the contents of the report.
The notices described above are required only if the employer is allowed to pull credit reports. Most are not. The general rule in California is that an employer may not consider acquire or consider a person’s credit report in making job decisions except for applicants for or employees in: