Blog

 
     

backgroundchecks.com Legislation and Compliance Update: Vermont Limits Credit Reports

By Michael Klazema on 5/31/2012

Vermont has become the eighth state to limit an employer’s use of credit information in making employment decisions. On May 17, the governor signed Senate Bill 95, which prohibits employers from asking for or considering an applicant’s or employee’s credit information. The prohibition applies both to credit report and to credit history obtained from sources other than credit reporting agencies.

The new law appears to go into effect July 1.

The law creates the following exemptions:

a.     When the information is required by state or federal law or regulation.

b.     The position of employment involves access to confidential financial information, meaning sensitive financial information of commercial value that a customer or client of the employer gives explicit authorization for the employer to obtain, process, and store and that the employer entrusts only to managers or employees as a necessary function of their job duties

c.     The employer is a financial institution or a credit union defined under state law.

d.     The position of employment is that of a law enforcement officer, emergency medical personnel, or a firefighter as defined under state law.

e.     The position of employment requires a financial fiduciary responsibility to the employer or a client of the employer, including the authority to issue payments, collect debts, transfer money, or enter into contracts.

f.      The employer can demonstrate that the information is a valid and reliable predictor of employee performance in the specific position of employment.

g.     The position of employment involves access to an employer’s payroll information.

Even under these exemptions, the law prohibits employers from using the credit information “as the sole factor in decisions regarding employment, compensation, or a term, condition, or privilege of employment.”

The law also creates new procedural obligations for employers seeking credit information. When obtaining or acting on credit information, the employer must:

1.     Obtain the employee’s or applicant’s written consent each time the employer seeks to obtain the employee’s or applicant’s credit report.

2.     Disclose in writing to the employee or applicant the employer’s reasons for accessing the credit report.

3.     If an adverse employment action is taken based upon the credit report, disclose the reasons for the action in writing.

4.     Ensure that none of the costs associated with obtaining an employee’s or an applicant’s credit report or credit history are passed on to the employee or applicant.

5.     Ensure that the information in the employee’s or applicant’s credit report or credit history is kept confidential.

6.     If the employment is terminated or the applicant is not hired by the employer, provide the employee or applicant with the credit report or have the credit report destroyed in a secure manner which ensures the confidentiality of the information in the report.

The text of the law is available at http://www.leg.state.vt.us/docs/2012/Acts/ACT154.pdf.

Employers should immediately review their use of credit reports in Vermont.

The other states that have limited the use of credit reports for employment are Washington (2007), Hawaii (2009), Oregon (2010), Illinois (2010), Connecticut (2011), Maryland (2011), and California (2011). Additionally, the National Conference of State Legislatures (ncsl.org) tracks proposed laws relating to the use of credit reports in employment. The current link for 2012 information is http://www.ncsl.org/issues-research/banking/use-of-credit-info-in-employ-2012-legis.aspx.

Disclaimer: This is an alert to make you aware of a law that may affect your background screening program. This is not legal advice.



Tag Cloud
Categories
Recent Posts

Latest News

  • June 14 Ban the box laws aim to improve opportunities for employment. Could they have the opposite effect instead?
  • June 13 Jacobs Petroleum Products is a regional petroleum company that operates throughout Pennsylvania, West Virginia, Ohio, and Maryland. Apart from their employees carrying much responsibility and have frequent contact with customers, the company’s hiring also tends to be segmented since individual store managers are responsible for hiring talent for their own stores. In this employment landscape, Jacobs Petroleum Products needed a reliable and effective way to screen its new hires for criminal infractions and other red flags.
  • June 12

    The University of Wisconsin System may tweak its hiring and reference check processes. The potential changes come after one of UW’s assistant deans was accused of sexual harassment.


  • June 07 Stories of abuse by coaches in youth sports leagues continue to crop up around the country, but rules and guidelines remain patchy and enforcement is often lacking. The struggle to implement an effective system continues nationwide.
  • June 07 Financial background checks, usually referred to as credit history checks, can be an effective way to find out if a candidate is fit to handle accounts, financial data, and other assets at your business.
  • June 06 The Society for Human Resource Management and the Charles Koch Institute recently commissioned a survey to find out how willing employers were to hire people with criminal records. The study indicates that managers, HR professionals, and employees themselves are becoming more comfortable with the idea of hiring and working with ex-offenders.
  • June 04 Are fingerprint background checks the gold standard for employee screening, or are they overhyped? We look at some of the myths and misconceptions surrounding these checks.
  • June 04 The organization, The Family Resource Center of North Mississippi (FRCNMS) was founded on the belief that families are the heart of community and that promoting healthy families leads to healthy communities. Read more about how they carefully screen and vet new employees with the help of backgroundchecks.com.
  • June 01 Past mistakes can have lingering effects in criminal records that appear on background checks. People with minor convictions can erase those mistakes for help starting over. 
  • May 29 The city of Greenley, Colorado has added background checks and new affidavits to its process for screening candidates for city council. The new measures come after a candidate with a felony conviction for forgery got elected as city councilman.