– Est. –

New Restrictions in Oregon for using Credit History for Employment Purposes

The Oregon Legislature just passed Senate Bill 1045, which Governor Kulongoski signed on Monday, March 29, 2010, that will prohibit an employer from obtaining or using a credit history report of an applicant or current employee in order to make employment hiring, firing, and promotion decisions. The new law is effective as of July 1, 2010. If an employer violates this new law, it will be liable for compensatory and punitive damages.

The Bill has a number of exceptions. First, if the employer is a bank or a law enforcement agency, the restriction does not apply. Second, if the employer is required to check credit history under federal law, the restriction does not apply. Last, if the employer can show that the information is “substantially job-related” and the reasons for the employer’s use of the information are disclosed to the applicant or employee in writing, the restriction does not apply.

Unfortunately, the Legislature did not define what it considers to be a “substantially job-related” reason for a credit history check. This could allow for judicial interpretation that produces unexpected results for both employers and employees. The courts could make the substantially job-related exception so expansive that any employer can fit within the exception when it gives its employees a boiler-plate form stating the importance of good credit history. On the other hand, the courts could make the exception so narrow that employers will face liability for relying on credit history, even when they have a valid reason to do so.

The Oregon Bureau of Labor and Industries will seek public comments on possible regulations that will interpret Senate Bill 1045. In the meantime – that is, once the bill is effective on July 1 of this year – employers should reevaluate their systems and procedures for using credit checks in employment decisions.