At the start of this month, Vermont became the eighth state to stop employers from pulling credit reports of job applicants as part of the hiring process. Vermont’s new employment law specifically prohibits employers from inquiring into the credit histories and credit reports of job applicants and employees, and it also bans discriminating against employees or applicants based on credit information.
In recent years, employers have run more and more credit checks on job applicants. In fact, a survey conducted in 2010 by the Society for Human Resource Management found that 60 percent of employers polled performed a credit check of some sort on job applicants.
Just more than half of the employers surveyed said that the main reason they conducted the credit checks was to avoid embezzlement, theft and other crimes in the workplace.
However, critics of using credit reports and histories have said that a person’s credit history is not a legitimate predictor of future job performance. They have also said that the practice can result in discrimination and that furthermore, credit reports are notorious for containing inaccuracies.
Finally, critics have said that the use of credit histories as a job screening measure is sort of a double-edged sword, as applicants with bad credit cannot pay their bills because they cannot find employment, but they cannot find employment because of bad credit mounting from the inability to pay bills.
California, Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington state have already banned this practice and other states as well as the U.S. Equal Employment Opportunity Commission are pursuing further employer credit check restrictions.
Some employers in Vermont are exempt from some of the stipulations of the new credit check law. These include financial institutions and credit unions, as well as the job positions of law enforcement officers, emergency medical personnel and firefighters, among a few others.
Workers in states with credit check bans may be wise to talk with an employment law attorney if they feel they have been wrongly coerced into allowing an employer to view their credit history, or that they have been discriminated against because of their credit.
Employers may also choose to seek legal counsel to ensure they are in compliance with these laws.
Source: ESRNews, “Vermont to Prohibit Employers from Using Credit Reports for Employment Decisions Starting July 1,” Tom Ahearn, June 14, 2012