On Thursday, the House Financial Services Committee held a hearing to discuss the Equal Employment for All Act (H.R. 3149), legislation that would make it unlawful, with certain limited exceptions, to base adverse employment decisions against prospective and current employees on consumer credit reports. While a number of panelists spoke in support of limiting the use of such employment-based credit checks, others testified that doing so is unnecessary and could put employers at risk.
Speaking on behalf of the U.S. Chamber of Commerce, attorney Don Livingston argued (pdf) that the prohibitions in this bill are too broad. Specifically, Livingston noted that the measure would forbid most employers, “including those in positions similar to jobs at financial institutions, from considering credit history information in all circumstances, even where it can be shown that the information is related to a specific job.” Livingston testified that such credit histories are used mainly to check potential employees for executive-level positions, or those that will have financial responsibilities, to ensure that such individuals would not pose a financial risk to the company.
Livingston further noted that current law contains sufficient safeguards to prohibit discrimination based on credit reports. Notably, under the Fair Credit Reporting Act (FCRA), employers may use the results of a credit report only if they do not intend to discriminate on the basis of race, sex, age, or some other protected status, and the use does not disproportionately impact one or more of these protected groups. If the use of the credit report does disproportionately affects any one class, the onus is on the employer to prove that this practice is “job-related and consistent with business necessity,” which has shown to be a stringent standard. Therefore, Livingston testified, “the principles of equal employment opportunity have served well. The proposed legislation would serve less well because, except in an artificially narrow set of circumstances, it would needlessly prevent employers from using credit checks that are justified by business necessity.”
Judy Gootkind, speaking on behalf of the National Association of Professional Background Screeners (NAPBS), echoed this position, stating (pdf) that the legislation, as drafted:
too narrowly restricts the use of credit reports for employment purposes, and all but prohibits them in the private employment space. As drafted, the legislation would limit the use of credit reports for those jobs requiring national security or FDIC clearance, state or local government agency employment, supervisory, managerial, professional, or executive positions at a financial institution, or when otherwise required by law.
On behalf of the Society for Human Resource Management (SHRM), Colleen Parker Denston similarly stated (pdf) that “there is a compelling public interest in enabling our nation’s employers to assess the skills, abilities, work habits, and integrity of potential hires.” Denston explained that past employer references often do not provide sufficient information about a prospective employee due to liability concerns. Credit checks, therefore, fill in important information gaps.
According to her testimony, the pending legislation, in its current form, would prevent employers from conducting credit checks on job candidates for the following positions:
- Managerial positions at institutions of higher education that manage significant endowments, including taxpayer-funded federal and state grants and appropriations;
- Real estate professionals that process financial transactions;
- Nearly all positions in airline companies, from customer service representatives to maintenance workers, that provide access to financial or security-related information;
- Private security professionals that have access to sensitive physical security information for public facilities;
- Human resources positions that have access to Social Security numbers, bank account numbers, and other personal information;
- Positions at all organizations that process or store consumer credit card data and must be PCI Compliant.
Denton also noted that the FCRA provides adequate safeguards against violations of individual privacy and discrimination, including the fact that it requires employers to obtain written permission from applicants and employees before conducting a credit check, and to inform applicants if an adverse employment decision was based on a credit-related issue.
A complete list of those testifying at the hearing and their written testimony, in addition to a webcast of the proceeding, can be found here.
Photo credit: Infografick