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Effective October 1, 2013, Nevada will officially join 10 other states that have passed legislation that restricts an employer’s ability to use credit information as a part of their employment screening process.  In the past several years, California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington have passed similar legislation.

All 10 of these states have made this decision due to the fact that credit reports have been deemed to be an unfair tool in determining a person’s ability for general employment purposes.   Some of these states have provided specific instances in which credit reports can still be used as a part of an employment screening.  California, for example, allows the use of credit reports for positions that involve direct involvement with finances, law enforcement, positions with the Department of Justice or positions in which the information contained is required by law to be disclosed or obtained.

In the State of Nevada, under Senate Bill 127, these new laws impose high penalties for non-compliance.  These include civil actions, $9,000 per incident, and possible class actions against employers who found to not be in compliance on October 1 and beyond.  As this is a new piece of legislation, it is important for any company in Nevada to begin reviewing their employment screening practices, and come into compliance with their use of credit reports and credit history in anticipation of the new law. 

The Equal Employment Opportunity Commission (EEOC) is expected to add additional guidance later this year regarding the use of credit reports.  As this seems to be a growing trend, it is expected that many other states will follow suit, and create laws against the use of credit reports for employment screening purposes.  Over the past couple of years, the EEOC has been working to create more guidance for companies to follow when considering hiring new employees.  These new EEOC rulings have created changes in the way companies utilize background checks, which has caused many to apply modifications to their employment screening procedures.  It is important for hiring managers and HR departments to review their local and state guidelines and understand any changes that have come about, in addition to identifying key changes from the federal government and the EEOC.