An article that I recently published in BNA’s Privacy & Security Law Report examined the incipient trend towards state law restrictions on the use of credit history in employment decisions. Illinois has now become the fourth state — following Hawaii, Oregon, and Washington — to impose such restrictions, and similar bills are pending in nearly one dozen other states.

The Illinois law, enacted on August 10 and effective on January 1, 2011, generally prohibits employers from making any employment decision based upon an individual’s credit report or credit history. While the term “credit report” is limited to credit information provided by a consumer reporting agency (e.g., a background check vendor), the statute broadly defines “credit history” to include “an individual’s past borrowing and repaying behavior, including paying bills on time and managing debt and other financial obligations.” The new law also generally prohibits employers from obtaining a credit report on an applicant or employee and from asking an applicant or employee about his credit history.

The law’s numerous and broad exceptions will limit its impact. Significantly for the financial services sector, the law expressly excludes banks, insurers and surety companies from its coverage by excepting them from its definition of “employer.” The following categories of positions also are excluded from the law’s coverage:

• Positions involving access to sensitive information;
• Positions involving unsupervised access to cash or marketable assets valued at more than $2,500;
• Positions with signatory power over business assets of $100 or more per transaction;
• Managers who set the direction of or control a business;
• Positions for which the employer is required by law to obtain a bond;
• Positions for which state or federal law or regulation establishes credit history as a bona fide occupational qualification; and
• Positions for which the employer is required by law to obtain credit history.

The first exception is particularly broad given the many different types of information to which it applies. More specifically, Illinois employers can obtain credit reports and credit history from applicants or employees whose position involves access to any of the following categories of information: (a) sensitive information that a customer gives the employer explicit authorization to process; (b) sensitive information that an employer entrusts only to managers and a select few employees; (c) sensitive information that is secured so as to make it inaccessible to the public and low-level employees; (d) non-public information about the employer’s overall financial direction, including company tax and profit and loss reports; (e) sensitive information regarding an employer’s overall strategy or business plans; and (f) information that would jeopardize national or state security if publicly available. The statute does not define the term “sensitive information” and, therefore, appears to leave the determination of sensitivity to the employer’s reasonable discretion.

When taken together these exceptions appear to permit credit checks on large swaths of an organization’s workforce. At a minimum, all senior executives, in-house attorneys, human resources professionals, and finance department employees, virtually all information technology employees and managers with money-handling responsibilities appear to fall within the scope of the law’s exceptions. By contrast, most lower-level employees — except perhaps customer service positions involving access to sensitive customer information — likely would be covered. Each employer will need to conduct its own analysis to identify the categories of Illinois employees from whom credit information can lawfully be obtained and considered in employment decisions.

For further analysis of this development, see Littler ASAP "New Illinois Law Puts Credit Reports and Credit History Off Limits for Most Employers and Most Positions" by Philip L. Gordon and Jeffrey C. Kauffman.

This entry was written by Philip L. Gordon.

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