Pre-Employ Blog

Nevada Becomes Latest to Restrict Employer Use of Credit Checks

Posted by admin on June 04, 2013

Another Western state has limited business' use of credit checks in making employment decisions. Nevada recently enacted a law restricting use of such checks not long after Colorado implemented a measure of its own that tightens the applicable scope of the use of credit checks by employers.


Employers limited in several respects

Recently, Nevada Gov. Brian Sandoval signed into law SB 127, a legislative measure that bans employer use of credit checks in employment decision-making in several instances. The new law will go into effect Oct. 1, 2013.

Under the stipulations of the measure, employers will not be legally allowed to "directly or indirectly require, request, suggest or cause any employee or prospective employee to submit a consumer credit report or other credit information as a condition of employment."

If employers somehow end up in possession of a consumer report, they are prohibited from using, accepting, referring to and inquiring about it during employment decisions.

Companies will also be banned from discharging, disciplining or discriminating against employees or job applicants that refuse or decline to supply their prospective employers with a credit check.

The law does make exemptions for some instances. Employers are permitted to request or consider credit information if required to by state or federal law or if it is "reasonably related to the position for which the employee or prospective employee is being evaluated for." Such instances include the care and handling of financial accounts, managerial responsibility and direct exercise of law enforcement.

Trend in legislation

Nevada's move to restrict use of credit checks comes soon after Colorado Gov. Jamie Hickenlooper signed into a law a bill in the state that will similarly ban employer use of reports in many cases.

The two states now join California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington as those that enforce laws regarding use of credit checks.

That number may soon rise. According to a legal brief from firm Littler Mendelson, like-minded legislation is currently being considered in Florida, New Jersey, New York and Pennsylvania.

Given the increased frequency and regulatory constriction of such bills, compliance in using background screening solutions has never been more important to the health and integrity of a business. Partnering with an HR service provider equips corporations with the tools they need to ensure legal abidance.

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Topics: HR Compliance