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Washington Labor & Employment Wire » Akin Gump Labor and Employment Partner Don Livingston Testifies Before Congress on Legislation to Restrict Use of Credit Checks in Employment

Akin Gump Labor and Employment Partner Don Livingston Testifies Before Congress on Legislation to Restrict Use of Credit Checks in Employment


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On September 23, 2010, the House Financial Services’ Subcommittee on Financial Institutions and Consumer Credit held a hearing on H.R. 3149, the Equal Employment for All Act.  The proposed legislation, sponsored by Rep. Steve Cohen (D-TN9) and co-sponsored by 55 other members of Congress, would make it unlawful for an employer to procure a credit report for use in a hiring or promotion decision with limited exceptions, such as for jobs that require a national security clearance, jobs at state and local agencies, and high-level financial positions.

Under existing law, an employer may procure and use credit history information in a hiring or promotion decision only when it can show that the information is “job related for the position in question and consistent with business necessity.” 42 U.S.C. § 2000e-2(k)(1)(A)(I).  Employers must also comply with the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., which requires them to provide a credit report and a notice of adverse action to an employee or potential employee before taking adverse action based on that report.  If the employee or potential employee believes that the report contains errors, he or she may dispute the accuracy of information on the report with the reporting agency within a statutorily defined time period.  Further, if the employee or potential employee believes the credit information is not job-related, he or she may challenge the employer’s use of that information with the Equal Employment Opportunity Commission (”EEOC”).

The hearing was lively with representatives from both sides of the aisle along with a panel of witnesses who had opposing views on the proposed legislation.  Proponents of the bill argued generally that credit information is not indicative of a person’s integrity or ability to perform a certain job, and that the use of credit information in hiring has a disparate impact on blacks and other minorities who are statistically more likely than others to have poor credit.

“Using a job applicant’s credit history to deny employment is not fair because personal credit history is not an accurate predictor of job performance,” Representative Cohen said. “We should be doing everything in our power to help people find jobs during these tough economic times - not hinder them.” 

Opponents of the legislation, including the U.S. Chamber of Commerce, argued that credit information is a useful tool for employers and that the current laws sufficiently protect employers and employees alike.  Akin Gump’s Labor and Employment partner Don Livingston testified during the hearing on behalf of the U.S. Chamber of Commerce.

“Existing law provides the best method for ensuring that credit history information is used where justified and eschewed where it is not,” according to Mr. Livingston.  “The principles of equal employment opportunity have served well.  The proposed legislation will serve less well because, except in an artificially narrow set of circumstances, it would needlessly prevent employers from using credit checks that are justified by business necessity.”     

The bill has not yet been put to a formal vote.