Connecticut Employment Law Blog Insight on Labor & Employment Developments for Connecticut Businesses

Senate Passes Bill Banning Use of Credit Reports by Employers With Exceptions

Posted in Human Resources (HR) Compliance, Legislative Developments

UPDATED June 9, 2011 - The House approved the measure late last night, June 8th. For additional details, see this updated post.

In the closing hours of the General Assembly’s term, the Connecticut Senate has passed a bill yesterday that would ban the use of credit reports by employers in many situations.

Senate Bill 361 passed along party lines and can be viewed here. It now goes to the House for a possible vote by the end of the term.

Will Employers Be Banned From Using Credit Score Numbers?

The bill, in its present form bans employers from requiring employees or prospective employees to consent to a request for a  report that contains information about the employee’s or prospective employee’s credit score, credit account balances, payment history, savings or checking account balances or savings or checking account numbers.

There are several exceptions, however:

  • Employers that are “financial institutions” as defined by the statute;
  • The report is otherwise required by law;
  • The employer reasonably believes that the employee has engaged in specific activity that constitutes a violation of the law related to the employee’s employment,
  • The report is substantially related to the employee’s current or potential job or the employer has a bona fide purpose for requesting or using information in the credit report that is substantially job-related and is disclosed in writing to the employee or applicant.

And what does “substantially related to the job” mean? Well, the bill also contains a definition for that as well.  According to the bill, it means that the position:

  • Is a managerial position which involves setting the direction or control of a business, division, unit or an agency of a business;
  • Involves access to customers’, employees’ or the employer’s personal or financial information other than information customarily provided in a retail transaction;
  • Involves a fiduciary responsibility to the employer, including, but not limited to, the authority to issue payments, collect debts, transfer money or enter into contracts;
  • Provides an expense account or corporate debit or credit card;
  • Provides access to (i) confidential or proprietary business information, or (ii) information, including a formula, pattern, compilation, program, device, method, technique, process or trade secrets; or
  • Involves access to the employer’s nonfinancial assets valued at two thousand five dollars or more, including, but not limited to, museum and library collections and to prescription drugs and other pharmaceuticals.

As you can see, these exceptions are numerous. Of course, what is a “managerial” position in this context? The bill is silent.

And even if an employer falls within an exception, the employers still has to comply with the Fair Credit Reporting Act.

As for the scope of the bill, all employers (those that have 1 or more employees) would be covered by this bill.  If approved by the House (and signed by the Governor), it would become effective October 1, 2011.