New rules implemented as part of the Dodd-Frank financial overhaul have altered the required notifications employers must give employees and applicants if they take adverse employment action based in whole or in part on the employee’s or applicant’s credit report or score.
The new rules, which took effect in July, require employers who take adverse employment actions (firing, demoting, or failing to hire) based on an employee’s or applicant’s credit report or credit score to make further disclosures. Previously, employers were required to provide certain information disclosing the use of the employee’s or applicant’s credit history; however, the new rules now add more specific disclosures:
- the specific, numerical credit score;
- the date the score was created;
- the range of possible scores; and
- up to four key factors that adversely affected the score.
Additionally, while Virginia has not followed suit, some states have restricted employers from making employment decisions based on the employee’s or applicant’s credit history. If all that weren’t enough, the EEOC has also warned employers that using credit history in employment decisions may adversely impact minorities, subjecting employers to discrimination claims if they’re not careful.
If you’re using credit history to make employment decisions, make sure your notices are updated and you have a valid business justification for doing so.