California Law on Credit Checks for Employment

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.

What Is the Fair Credit Reporting Act?

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?)

State Law: The California Consumer Credit Reporting Agencies Act

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.

Can I Be Denied a Job Because of My Credit in California?

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:

• managerial positions
• positions with the state Department of Justice
• law enforcement positions, including peace officers
• positions for which information in the credit report is legally required to be disclosed
• positions that involve regular access, for purposes other than routine solicitation and processing of credit card applications in a retail business, all of the following information for any one person: date of birth, Social Security number, and credit or bank account information
• positions that include the authority to be a named signatory on the employer's bank or credit card account, to transfer money on the employer's behalf, or to enter into financial contracts on behalf of the employer
• positions that involve access to the employer's trade secrets or confidential or proprietary information, or
• positions that involve regular access to at least $10,000 during the workday.

Procedures If Employer Fails to Hire Based on Credit Report

If an exception above applies and an employer decides not to hire an applicant based on their credit report, they must follow certain procedures.

The employer is required to provide the applicant with a copy of the credit report and a written explanation of their rights under the law. This gives the applicant an opportunity to dispute any inaccuracies in the report.

Contact an Employment Law Attorney

If you've been denied a job and you suspect it's because of your credit report, consider contacting an employment law attorney to discuss your legal options. An attorney can help you determine whether the employer was allowed to check your report as part of the hiring process, and whether it followed the proper procedures for doing so.