Bright Idea Newsletter – July 2011

Bright Idea Newsletter – July 2011

Maryland Law Limits Credit Reports for Employment Screening Purposes

Maryland has signed into law the Job Applicant Fairness Law (HB 87) which will significantly limit the employer’s use of credit history for making hiring and other employment-related decisions. The Act goes into effect October 1, 2011.

Under the Act an employer may not use an applicant’s or and employee’s credit report or credit history to make certain kinds of employment decisions unless it meets certain conditions. The Act prohibits decisions determining:

  • Whether to deny employment to the applicant;
  • Whether to discharge the employee, and
  • Compensation, or
  • The terms, conditions or privileges of employment.

However, an employer may use credit information to make these decisions if it meets both of the two conditions below:

  1. Credit history must be “substantially job-related” for the job in question. The statute does not define the term “substantially job-related” but it does list positions for which credit history is automatically job-related. For example:
  • Managers who have the authority to set the direction or control of a business or a department, division, unit or agency of a business;
  • Positions involving access to personal information of customers, employees, or the employer, e.g., social security numbers, driver’s license numbers, financial account numbers or more personal information than is customarily provided in retail transactions;
  • Those with fiduciary responsibility to the employer, e.g., authority to issue payments, collect debts transfer money, enter into contracts, etc.
  • Employees who have an expense account or a corporate credit or debit card;
  • Those with access to trade secrets or other confidential business information.
  1. The employer must disclose the purpose for using the credit history to the applicant or employee in writing. The statute provides no guidance on what an acceptable disclosure would be. There are two problem areas where the employer will have to guess.
  • The text of the disclosure. Because of the Federal Credit Reporting Act, the employment-purposes disclosures under the FCRA may not be enough. The purpose in the disclosure must relate to the job type and may not need to be specific. The disclosure might be stated, “We will obtain a credit report about you to assess the risk that you could misuse other people’s personal information for personal gain.”
  • The timing of the disclosure. Providing the disclosure before the request is the safest approach.

The Act does not apply to employers that are financial institutions, state-approved credit unions, investment advisors registered with the Securities and Exchange Commission, and companies that are required by federal law to examine credit history data.

Additionally, the Act does not prohibit employers from conducting other employment-related background checks, such as driving records, criminal records or education or employment verification.

The text of the law is available at:

Share this story