The law creates the following exemptions:
- When the information is required by state or federal law or regulation.
- 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
- The employer is a financial institution or a credit union defined under state law.
- The position of employment is that of a law enforcement officer, emergency medical personnel, or a firefighter as defined under state law.
- 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.
- The employer can demonstrate that the information is a valid and reliable predictor of employee performance in the specific position of employment.
- 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:
- Obtain the employee’s or applicant’s written consent each time the employer seeks to obtain the employee’s or applicant’s credit report.
- Disclose in writing to the employee or applicant the employer’s reasons for accessing the credit report.
- If an adverse employment action is taken based upon the credit report, disclose the reasons for the action in writing.
- 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.
- Ensure that the information in the employee’s or applicant’s credit report or credit history is kept confidential.
- 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). Our prior descriptions of some of these laws are:
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.