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How Employers Can Use a Credit Check Against An Employee

Increasingly, employers have used credit checks to screen employees and make hiring and firing decisions. In fact, according to one 2018 HR.com report, as many as 16% of all employers in the United States conduct a credit check on all employees as part of the hiring process, and a third pull credit reports on at least some of their job candidates. But what is an employment credit check, and how can employers use them against their employees?

 

What is a Credit Check?

In simple terms, an employment credit check is a type of report that employers can request about prospective and current employees, which gives information about the employee’s credit history. This contains much of the same information a lender would see when you apply for a loan or mortgage, including your employment history, any open lines of credit you have, how much debt you have, and whether you have any missed payments, defaults or bankruptcies. For an employer to perform a credit check, you must first consent to it, but an employer can make consenting to the check a condition of employment.

Why Are Credit Checks Used By Employers?

Employers like to use credit checks because they can, in theory, help to identify people who may pose a risk to a company’s finances or its sensitive data. However, the extent to which employers are able to use a credit check is limited by law. As Steven Sack says in his book, Fired!, “employers are generally forbidden to use credit reports for firing decisions unless the job is security-conscious or the financial integrity of the employee… is essential to continued successful job performance.”

How Can They Be Abused?

While certain laws, such as the Fair Credit Reporting Act and the federal Bankruptcy Code, limit the extent to which a credit check can be used against an employee, employers will sometimes abuse this information. For example, they may decide not to hire someone as a result of having major debts, out of fear that they may try to steal from the company, or they may fire someone who files for bankruptcy. Credit checks can also be used as legal cover for other forms of discrimination, providing a justification for firing or failing to hire employees that belong to protected classes.

What Should You Do if You Are Fired Due to a Credit Check?

If you are fired, or do not get hired, as a result of a credit check, you may be able to pursue legal action against your employer. However, to understand the full extent of your rights, you should speak to a lawyer with experience handling employment law claims. They can help you to devise a legal strategy that can protect your interests, and get you the best possible outcome to your case.

Steven Mitchell Sack, the Employee’s Lawyer, is a New York employment lawyer with more than 41 years’ experience handling the many aspects of employment law. His new book, “Fired!: Protect Your Rights & FIGHT BACK If You’re Terminated, Laid Off, Downsized, Restructured, Forced to Resign or Quit,” is available in hardback, and contains valuable advice on dealing with employment and labor law issues. To purchase the book, feel free to contact Steven Sack at 917-371-8000 or visit the website at legalstratpub.com. To inquire about a legal matter, please feel free to contact attorney Steven Sack at 917-371-8000 or stevensackatty@hotmail.com.

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