Last week, Oregon joined a growing national trend, apparently in response to the recession and the foreclosure crisis, that restricts the ability of employers to use credit history in employment decisions. Under the Oregon law, it is an unlawful employment practice, except in limited circumstances, for an Oregon employer to use credit history in making hiring decisions or any decision affecting current employees. The law confers on Oregon employees the right to file an administrative complaint or a private lawsuit claiming that the law has been violated. Employees who prevail may recover lost wages and attorney fees. The law becomes effective July 1, 2010.
Hawaii and Washington have recently enacted similar laws. Bills currently are pending in the following states: Connecticut, Illinois, Maryland, Michigan, Missouri, New Jersey, New York, Ohio, Oklahoma, South Carolina, Vermont, and Wisconsin. Legislation also is pending in the United States House of Representatives to amend the Fair Credit Reporting Act to prohibit use of consumer credit checks in employment decisions.
There are several exceptions to the new Oregon prohibition. Specifically, federally insured banks and credit unions, businesses required by law to consider employee credit history, and police and other public employers hiring for law enforcement and airport security may still conduct credit checks. In addition, the law contains a somewhat vaguely worded exception that permits employers to conduct credit checks for “substantially job-related reasons,” so long as those reasons are disclosed to the employee in writing.
Employers should exercise caution in applying the “substantially job related” exception. It is unclear as yet how that exception will be interpreted, either by regulation or the courts. In the meantime, employers should consider obtaining a credit check on an applicant or employee only in those situations where the results of the check would have a significant bearing upon the determination whether the applicant or employee can perform essential job functions and even then should consult with counsel before relying on this exception.