The use of credit checks by employers as an employment selection criterion is under scrutiny both federally and at the state level.  The U.S. Equal Employment Opportunity Commission, on October 20, 2010, met to review potential policy implications of employers’ use of such credit checks.  The agency has already brought a legal challenge to the use of such records for having an adverse disparate impact against African-Americans.  Meanwhile, some states are moving in the direction of restricting the use of credit checks for making employment-related decisions.

On August 10, 2010, Illinois Governor Pat Quinn signed Bill 4658, which will become the Employee Privacy Act.  It will significantly restrict the rights of Illinois employers to conduct credit checks and use the information for hiring or other employment-related decisions.   The Act, effective January 1, 2011, will generally prohibit employers from (1) inquiring into an applicant or an employee’s credit history, (2) ordering a credit report from a consumer reporting agency, or (3) taking any employment action (such as refusing to hire someone) because of the individual’s credit history or credit report. 

Some types of employers are specifically exempted from the Act; also, under certain circumstances, employers still will be able obtain and use information from a credit report. 

The following types of employers are specifically exempted from coverage:

  • banks and other financial institutions;
  • businesses engaged in insurance or sureties;
  • state law enforcement agencies;
  • state and local government agencies that require credit reports; and
  • qualified debt collection agencies.

Also, any business can conduct a credit check if it can establish credit worthiness is a bona fide job qualification.  To do so, the employer will have to show at least one of the following: 

  • The position involves unsupervised access to cash or marketable assets with a value of $2,500 or more.  Marketable assets are defined as company property that is specially safeguarded from the public and to which only managers and select employees have access.  The Act expressly states that the employer’s fixtures, furnishings or equipment are not marketable assets.
  • The position involves power to sign for business assets of $100 or more per transaction.
  • The position is a managerial position that involves setting the direction or control of the business.
  • The position includes access to protected information, such as personal or confidential information, financial information, trade secrets or State or national security information.  These terms are defined in the Act. “General proprietary information” like employee handbooks, policies or “low-level” strategies are not trade secrets under the Act.
  • The United States Department of Labor or the Illinois Department of Labor has promulgated criteria establishing that credit worthiness is a bona fide job qualification for the position.
  • State or federal law requires the individual’s credit history or requires that the individual be bonded or otherwise secured to hold the position.

The Act does not provide for enforcement by any state agency; a private cause of action is authorized instead.  Under the Act, an individual can sue in state court for injunctive relief and damages, as well as costs and attorneys’ fees. 

Employers are expressly prohibited from requiring individuals to waive the Act’s protections.  Any such waiver will be invalid and unenforceable.  In addition, the Act prohibits employers from retaliating or discriminating against individuals who bring a claim under the Act, testify or participate in an investigation brought under the Act, or oppose a violation of the Act.

Finally, the Act restricts access to and use of credit information only.  It does not prevent an employer from obtaining a background or investigatory report from a consumer reporting agency as allowed under the Fair Credit Reporting Act, as long as the report obtained does not include credit information.

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Photo of Ana C. Shields Ana C. Shields

Ana Shields is a Principal in the Long Island, New York, office of Jackson Lewis P.C. Since joining Jackson Lewis in June 2005, she has practiced exclusively in employment law and has been involved in proceedings before federal and state courts, the American…

Ana Shields is a Principal in the Long Island, New York, office of Jackson Lewis P.C. Since joining Jackson Lewis in June 2005, she has practiced exclusively in employment law and has been involved in proceedings before federal and state courts, the American Arbitration Association and administrative agencies.

Ms. Shields has successfully prepared pleadings, motions, memoranda of law, position statements and legal opinions related to employment law issues such as employment discrimination, harassment, retaliation, whistle-blowing claims and restrictive covenants. Ms. Shields has advised clients on compliance with various state and federal laws affecting the workplace, including Title VII, the Equal Pay Act, Fair Labor Standards Act, Family and Medical Leave Act, Americans with Disabilities Act, Age Discrimination in Employment Act and New York State and City laws. In addition, she is a firm resource for Electronic Discovery. She has worked closely with clients through all phases of litigation including investigations, preparations for depositions, attending depositions and trials.

While attending law school, Ms. Shields was a published member of the New York International Law Review. She was the recipient of the 2003 American Bar Association/Bureau of National Affairs Award for Excellence in Labor and Employment Law. She was also awarded the CALI Award for Excellence in Employment Law, Advanced Labor Law, and Jurisprudence.

Prior to joining the firm, Ms. Shields was a commercial litigation associate at a firm in Long Island, New York.