Using Credit Reports When Making Employment Decisions

Using Credit Reports When Making Employment Decisions

Posted by on Mar 22, 2016 in Employment Decisions |

As a matter of policy, many employers regularly utilize credit reports when making hiring and/or other employment decisions. Such information can be useful in assessing the fiscal responsibility and stability of employees or applicants. While potentially useful, there are other competing factors that must be considered and that could potentially expose an employer to liability.

At the moment, Pennsylvania employers are permitted to consider a person’s credit history when making employment related decisions, including hiring decisions and decisions regarding promotion, demotion or termination.

However, in September 2012 a bill (H.B. 2619) was introduced to the General Assembly of Pennsylvania that would amend the Pennsylvania Human Relations Act to prohibit employers from requesting a credit report from a current employee or applicant.

Under the bill as drafted, there would be limited exceptions to the prohibition on employers’ use of credit reports. The bill provides that an employer would be able to require a credit report if required by law or the credit report is “substantially related to the employee’s current or potential job.” “Substantially related” is defined to include positions that are managerial in nature and involve setting the direction or control of the business, involve access to customer or employee personal or financial information other than information customarily provided in a retail transaction, or involve regular access to cash totaling $10,000 or more during the work day.

While the use of credit reports in employment decisions is not prohibited under Pennsylvania law at this time, it is anticipated that statutory prohibitions may go into effect in the future. Indeed, in recent years an increasing number of states have adopted legislation limiting or banning the use of credit reports by employers. Those who decide to disobey, could be the subject of any irs whistlebloweror someone who is obligated to report any unlawful action.

In addition to potential legislative limitations upon the use of credit reports, recent lawsuits filed by the United States Equal Employment Opportunity Commission (“EEOC”) must be considered. Within the past two years, the EEOC has filed several lawsuits in which it has alleged that employers violated federal anti-discrimination laws when relying on credit reports because the reports tend to have a “disparate impact” on minority employees and applicants. While the EEOC’s suits have not received a favorable reception in the courts, they illustrate the aggressive approach the EEOC is taking with what it views as the disparate impact resulting from the use of credit reports in employment decisions.


In light of these considerations, employers must proceed with caution with respect to the use of credit reports when making employment decisions.

It is recommended that employers do not adopt a blanket policy whereby credit history is considered with regard to all employees and/or applicants. Further, to the extent an employer considers credit history in employment decisions; such consideration should be on a limited basis and only when duties of a particular job establish a clear and compelling need for such information.

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