Under the Act, an employer may not use an applicant’s or an employee’s credit report or credit history in making certain kinds of employment decisions unless it meets certain conditions.
The Act prohibits decisions determining:
- whether to deny employment to the applicant;
- whether to discharge the employee, and
- compensation, or
- the terms, conditions or privileges of employment.
However, an employer may use credit information to make these decisions if it
meets both of the conditions below.
The first condition is that credit history must be “substantially job-related” for
the job in question. The statute does not define the term “substantially job-related,” but it does list positions for which credit history is automatically
“substantially job-related.” These positions include:
- Managers who have the authority to set the direction or control of a business or a department, division, unit, or agency of a business;
- Those that involve access to personal information of a customer, employee, or employer (including an individual’s first and last name, and his or her social security number, driver’s license number, or financial account number) and involve access to more personal information than is customarily provided in retail transactions;
- Those that involve a fiduciary responsibility to the employer, including the
authority to issue payments, collect debts, transfer money, or enter into
- Those that are provided with an expense account or a corporate debit or credit card, or
- Those that have access to trade secrets or other confidential business
The second condition is that the employer must disclose the purpose for using the credit history to the applicant or employee in writing. The statute provides no guidance on what an acceptable disclosure would be. There are two areas where employers will have to guess:
- The first problem area is the text of the disclosure. Because almost all credit history is provided by credit reporting agencies regulated by the Fair Credit
Reporting Act, the employment-purposes disclosures under the FCRA may not be enough. (If it were enough, then the Maryland legislature would not have needed to include this condition.) Our best guess is that, if the employer will rely on one of the statutory job types described above, the purpose in the disclosure must relate to the job type, but need not be specific to anything about the individual. For example, for a position that has access to personal information (#2 above), the disclosure might be: “We will obtain a credit report about you to assess the risk that you could misuse other people’s personal information for personal gain.” The statute does not seem to either endorse or prohibit multiple, alternative disclosures. (For example, “If you are applying to be a manager, then X; if you are applying for a position in finance, then Y.”) The problem with these types of disclosures is that reader may be unsure about which disclosure, if any,
applies to them. For employers that embrace this approach, the disclosure should be written in plain English and avoid cribbing the statutory language,
which may be too complex for many applicants to understand.
- The second problem area is the timing of the disclosure. The statute says, “An employer may request or use … credit history if … the employer has a bona fide purpose … that is … disclosed in writing to the employee or applicant.” Providing the disclosure before the request is the safest approach. It may also be that the legislature intended to allow employers to review information about an applicant to decide, on a case-by-case basis, when to request credit history; in that circumstance, it would be reasonable to expect the employer to send the disclosure to the applicant at the same time as the employer sends the request to the credit bureau. In any case, if an employer discovers that it has failed to provide the disclosure before the request, it is possible that providing the disclosure before using the information may satisfy the statute.
The Act does not apply to employers that are financial institutions, state-approved credit unions, investment advisors registered with the Securities and Exchange Commission, and companies that are required by federal law to examine credit history data.
In addition, the Act does not prohibit employers from conducting other employment-related background checks, such as of driving records, criminal
records, or education or employment verification.
The text of the law is available at http://mlis.state.md.us/2011rs/billfile/hb0087.htm
We are not a law firm and thus are not able to provide legal advice. If you need legal advice on the matters discussed above, we recommend that you contact consult with your legal counsel.