The Bottom Line: Credit report can't be used to deny a job

As of Jan. 1, California employers can no longer turn away prospective employees based on their credit history.

Assembly Bill 22, authored by Assemblyman Tony Mendoza and signed into law by Gov. Jerry Brown on Oct. 10, limits the use of consumer credit reports in the hiring process.

This is the third version of a bill that Mendoza, a Democrat from Artesia, has authored. Former Gov. Arnold Schwarzenegger vetoed two prior iterations of Mendoza's bills, AB 482 (2010) and AB 943 (2009).

"I didn't want to let it go," said Mendoza, current chairman of the California Latino Legislative Caucus who has represented the 56th District since 2006. "I wanted to see it through because it was the right thing to do. This was a bill that I felt good about because there are so many people unemployed and looking for jobs and these (employers) aren't hiring them for all the wrong reasons."

The assemblyman came across the issue when several of his constituents complained about the practice.

"They were concerned that they weren't being hired because of their credit score," Mendoza said.

Supporters of employers using credit checks say it is a way for employers to protect themselves against theft and fraud. They argue that those with a poor credit history or bankruptcy may be more reckless or more likely to engage in unethical or illegal behavior, especially in jobs where they handle money.

But Mendoza disagrees.

"A credit score or credit history does not say how trustworthy a person is or how hard-working they are," he said. "Everybody right now has really bad credit because of the economy."

California is the latest state to enact limits on pre-employment credit checks. Other states such as Washington, Oregon, Hawaii, Illinois, Maryland and Connecticut have similar laws in place.

The new California law exempts any position with the State Department of Justice; a sworn peace officer or other law enforcement position; and any position for which the information contained in the report is required to be disclosed by law or to be obtained by the employer.

Also exempted are all managers, named signatories, anyone with access to trade secrets, access to $10,000 or more in cash during the workday, and anyone who regularly works with information that can be used to commit identity theft.

Mendoza said the new law will have a significant economic impact, especially in 2012.

"Right now we're barely seeing this economy starting to recover," he said. "Hopefully, this legislation will help put us over the top and help push it in the right direction.",