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Turner/Gill Measure To End Employment Discrimination Based On Credit History Clears Labor Committee

A view of the Senate Chambers from the 2010-2011 Senate Reorganization.

New Jersey Would Become One of Only a Handful of States to Put An End to the Practice

TRENTON – A bill sponsored by Senators Shirley K. Turner and Nia H. Gill that would end employment discrimination based on an individual’s credit history or financial status was approved today by the Senate Labor Committee.

“The economic downturn has resulted in many individuals and families facing financial challenges. Residents have been unable to find work, many for months on end, and have had to choose between paying credit card bills and feeding their families,” said Senator Turner (D-Mercer). “Denying these individuals employment because of their financial position only exacerbates the unemployment and credit problems that exist and leaves individuals who need a job the most unable to obtain one.”

“The economic recession had a devastating financial effect on millions of people who previously had good credit,” said Senator Gill (D-Essex). “These circumstances have forced many New Jerseyans, especially the middle class, to take on debt they wouldn’t normally accrue in order to take care of their families. It is completely unfair to penalize those who are attempting to regain their financial independence through new employment simply because they have fallen on hard times.”

The bill (S-455) would prohibit an employer from making any inquiries into the credit history or financial status of a current employee or applicant for employment, unless a good credit history or financial status is an established bona fide occupational requirement for a particular position, as laid out in the bill. These exemptions would include: a managerial position that involves setting the financial direction or control of the business; a position that involves access to customers’, employers’ or employees’ personal belongings, financial assets or financial information other than that which is customarily provided in a retail transaction; a position that provides an expense account for travel or involves a fiduciary responsibility to the employer. It would also exempt from the bill any current or prospective employee being evaluated for a position in law enforcement or as security personnel.

The federal Fair Credit Reporting Act currently gives employers the right to conduct background checks on current and potential employees through third-party companies, with the individual’s approval. It is important to note that employers receive a credit report, not credit score, from consumer reporting companies. A credit report includes debt, bill-paying history, number and types of accounts, and whether an individual has been sued or has filed for bankruptcy.

“Failing to hire a prospective employee based on their credit history, when this information is irrelevant to the position they are seeking, is discriminatory,” said Senator Turner. “This legislation will ensure that applicants are treated fairly when applying for employment and subject to credit screenings only when the job includes direct financial responsibilities.”

“The use of credit checks as a tool to screen all applicants for a position is unacceptable,” said Senator Gill. “It punishes those who have been laid off during this unprecedented economic downturn and forced into difficult financial situations. Moreover, this process includes an in-depth review of personal financial documents, which in my opinion is an unnecessary breach of privacy when the information is unrelated to the position at hand.”

According to a survey by the Society for Human Resource Management, 60 percent of employers run credit checks on job applicants. Critics of this practice maintain that allowing employers to discriminate based on credit history creates a vicious cycle that can prevent those who most need jobs from getting them, especially during periods characterized by unprecedented unemployment. According to a December report from the National Conference of State Legislatures, seven states currently limit employers’ use of credit information: California, Connecticut, Hawaii, Maryland, Washington, Oregon and Illinois. Similar legislation has been introduced in dozens of other states.

The bill would prohibit any employment discrimination against a current or prospective employee based on information that is in a credit report. It would also prohibit an employer from requiring a prospective employee to waive any protections granted under this bill as a condition of applying for or receiving an offer of employment. In addition, it would prohibit an individual from retaliating or discriminating against another individual because that person filed a complaint under the bill, testified, assisted, or participated in an investigation, proceeding or action concerning a violation of the bill or otherwise opposed a violation of the bill. Any employer found in violation of the provisions of this bill could face civil penalties of up to $2,000 for the first violation, and $5,000 for each subsequent violation. The Commissioner of Labor and Workforce Development would be responsible for the collection of these fines.

The bill cleared the committee by a vote of 4-1. The measure now heads to the full Senate for a vote.

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