California Laws Bar Credit, E-Verify Checks of Most Employees

California has become the seventh state to prohibit credit checks in making employment decisions with legislation Gov. Jerry Brown signed into law.

Also this week, Brown signed into law another bill that prohibits federal E-Verify mandates in California.

With the signing of Assembly Bill 22, California joins Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington state in barring credit checks of prospective employees, according to the Denver-based National Conference of State Legislatures. To date, 58 bills in 28 states and the District of Columbia were introduced or pending in the 2011 legislative session, according to the organization.

On the federal level, observers cited an October hearing by the Equal Employment Opportunity Commission as a warning that employers should brace themselves for such legislation.

Under California’s law, which is effective Jan. 1, 2012, employers can use consumer credit reports for employment purposes only for the following: a managerial position; a position in the state Justice Department; a law enforcement officer; a position for which the credit report is required by law; a job that involves regular access to a retail establishment’s credit card applications; a post in which the person would be a named signatory on a bank or credit card account; jobs involving access to confidential information; and one that involves regular access to cash totaling $10,000 or more.

The bill opposing E-Verify mandates in California, A.B. 1236, would prohibit—except as required by federal law or as a condition of receiving federal funds—California, its cities, counties and special districts from requiring employers to use an electronic employment eligibility verification system. That includes cases when E-Verify is a condition of receiving a government contract, applying for or maintaining a business license, and as a penalty for violating licensing or other similar laws.

The legislation, the Employment Acceleration Act of 2011, states that making E-Verify mandatory would “increase the costs of doing business in a difficult economic climate.” It says the “United States Chamber of Commerce estimates that the net societal cost of all federal contractors using the E-Verify program would amount to $10 billion a year, federally” and that California businesses “would face considerable odds in implementing such a program.”

Congress established E-Verify, a voluntary Internet-based system under which an employer can verify an employee’s work authorization status, in the Illegal Immigration Reform and Immigrant Responsibility Act of 1996.

In May, the U.S. Supreme Court upheld an Arizona immigration law that requires all Arizona employers to verify the employment eligibility of new hires using E-Verify.

The ruling raised concerns that employers could face a patchwork of onerous anti-immigration laws unless Congress takes action.

According to the National Conference of State Legislatures, 10 states have enacted legislation this year that requires using E-Verify to determine employment eligibility: Alabama; Florida, by executive order; Georgia; Indiana; Louisiana; North Carolina; South Carolina; Tennessee; Utah; and Virginia. Eighteen states now have an E-Verify requirement, the group said.

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