On Monday, I talked about the latest initiative by state legislatures to prevent employers from demanding that applicants provide their social media passwords. A second trend has emerged with employers, whereby an applicant’s credit history and financial-related information are relied upon for hiring decisions. As with any background information, social media affords employers that same ease and speed in obtaining information about the creditworthiness and solvency of those applying for jobs.
Is that information relevant? Or, is it just another one of those categories of information that employers are obtaining because they can? That is the debate, and state legislatures are trending toward legislation that prohibits the use of credit reports for employment decisions, whether for hiring purposes or post-hire decisions.
Employers argue that an individual’s credit history and financial wherewithal are relevant to particular jobs, such as bank tellers and other positions involving the handling of money. However, those on the other side, including the United States Equal Employment Opportunity Commission, argue that the use of credit histories tends to have a discriminatory impact on minorities, women, and disabled individuals, with no evidence that financial history has any correlation to one’s ability to perform a job. I believe that a proper balance needs to be in place, so that, while we all want to eliminate any potential abuse and stereotyping, employers should still be able to rely on pertinent background information relating to the particular requirements of a job position.
Seven states currently have laws that prohibit employment-related decisions based on credit reports, including California, Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington. And, according to a recent survey, twenty-nine other states (and the District of Columbia) have introduced proposed legislation to accomplish the same purpose. What do you think – Is this a valid exercise of employee protection, or another example of government encroaching on the ability of an employer to make decisions that affect its business?
Employer Take Away: What should you as an employer take away from this development?
Like the recently-proposed laws addressing employer demands for social media passwords, there continues to be a rapidly-developing trend toward restricting the type of information that employers can obtain and rely on when it comes to hiring decisions. How the tension plays out between that legislative trend and the desire of employers to take advantage of the benefits afforded by social media, particularly as the final versions of these laws is still largely unwritten, remains to be seen.
Michael C. Schmidt is the vice chair of the firm’s Labor & Employment Department, and the office managing partner, vice chair, of the New York Midtown office, where he is resident. For more than two decades, Mike has concentrated his practice on representing companies and management in all facets of employment law, such as: (i) defense in litigation involving wage and hour (overtime and unpaid compensation), discrimination, harassment, retaliation and whistle-blowing, non-competes and trade secrets, and disability and other leave-related issues; (ii) day-to-day counseling and in-house training on issues from hiring to firing, and other questions unique to his client’s industries and business; and (iii) drafting and reviewing employment agreements, termination and severance agreements, confidentiality and non-competes, and employment policies and manuals.
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