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Credit Check Ban Sent to Governor
March 4, 2010

The Oregon legislature has sent SB 1045 to the Governor for signature; if signed the law will be in place immediately, but the formal operative date of the new prohibitions will be July 1, 2010. SB 1045 will require substantial changes for employers who use credit information to make employment decisions.

SB 1045 will make it an unlawful employment practice for an employer to obtain, or to use, information contained in the credit history of an applicant or employee or to use that information in deciding not to hire, to discharge, demote, suspend, retaliate or otherwise discriminate in making any employment related decision. "Credit history" is defined very broadly and includes any written or other communication of information by a consumer reporting agency that bears on a consumer's creditworthiness, credit standing or credit capacity.

There are some limited exceptions. Employers in the following categories are still permitted to obtain and use the information:

• Federally insured banks or credit unions;
• Employers who are required by law to use individual credit history;
• Employers of public safety officers who are members of a law enforcement unit.

There is a further exception for employers who can prove that the information is "substantially job-related" and whose reasons for the use of credit information are disclosed to the employee or prospective employee in writing. That language is a little different from the notice provisions of other employment laws -- typically employers are required to provide notice of their requirements, but don't normally have to explain why they introduced the requirement.

We don't have any reason to think the Governor will refuse to sign SB 1045. Once it is signed into law, employers who use, or want to use, credit information will need to evaluate whether they fall within one of the named exceptions in the law. If not, they will need to determine whether there is a substantial job related justification for obtaining credit information, document that reason, and prepare a prototype notice to applicants and employees explaining the requirement and the underlying reasons. Employers should also be cautious about obtaining information from former employers whose personnel records might include credit information received before SB 1045 was passed. Although receipt of second-hand information is not the harm that SB 1045 is designed to address, it may still be a violation.

You can read SB 1045 on the legislature's website. [PDF]