Labor and Employment

Background Credit Checks and Unemployment Discrimination

Searching for a new job is never easy, but it can be even harder when you are unemployed, have poor credit, or both. Many employer background checks include a review of the applicant's credit report. And in some cases, employers will disregard applications from those who are unemployed before even getting to the background check. Many states are currently examining the laws on these practices.

Employers Need Permission to Check Your Credit

Federal law forbids employers from checking a job applicant's credit without the applicant's written consent. When employers use a standardized consent form, they can't hide it within the general job application materials.

For example, if you apply for a job online and check the box indicating that you accept all terms and conditions, it' illegal for an employer to use this as automatic consent to check your credit. Instead, it must always be on a separate piece of paper so that you are aware of it.

Unemployment Isn't Always a Permissible Reason to Check Credit

Many states realize that the longer people are unemployed, the lower their credit scores become. To eliminate discrimination against the unemployed, some states have enacted laws that require an employer to have a valid reason for checking a job applicant's credit.

If your state provides this protection, it means that employers must show that the specific position for which you applied requires someone with good credit or, alternatively, why it's risky filling the position with someone who has poor credit.

Some States Limit Credit Checks to Certain Jobs

Some states, such as Maryland, take it a step further and prohibit employers from checking an applicant's credit unless the position is managerial, provides the employee with access to sensitive information, requires the employee to make payments or collect debts, or has access to an expense account or employer-provided credit card. Banks and investment firms are exempt from the law. They can check the credit of every job applicant.

Some Laws Prohibit Job Ads That Exclude the Unemployed

Some job application state outright that the unemployed shouldn't apply. Although employers can legally discriminate against the unemployed when hiring, a number of states have either passed, or are considering passing, laws that prohibit such language in job advertisements. Proposed legislation in a number of states would go even further, making the unemployed a protected class.

An Employment Lawyer Can Help

The law surrounding employment discrimination against the unemployed and those with poor credit is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact an employment lawyer.

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