Massachusetts Passes Bill That Could Bar Use of Credit Reports for Employment Purposes
In March 2024, the Massachusetts House of Representatives passed legislation called “An Act Reducing Barriers to Employment Through Credit Discrimination (H.1434)” that could bar the use of credit reports for employment purposes including evaluating an individual for employment, promotion, reassignment, or retention as an employee.
The Act – which would add a new provision to the Massachusetts Consumer Protection law and would be the most restrictive law of its kind in the United States if passed – is expected to be adopted by the Massachusetts Senate and signed into law by Massachusetts Governor Maura Healy. If adopted, the Act would take effect on January 1, 2025.
The Act would bar an employer from requesting a consumer report that includes an individual’s “credit worthiness, credit standing, or credit capacity” from a consumer reporting agency (CRA) – the official name for a background check company or a credit bureau – or to use that information to establish eligibility for employment, promotion, reassignment, or retention.
In addition, the Act would forbid an employer from requiring an individual to answer questions about information in the report regarding credit worthiness, credit standing, or credit capacity. However, the Act would apply only to credit reports and would not affect other types of background checks such as criminal record checks or driving record checks.
The only exemptions in the Act are for employers required by federal or state law to conduct credit checks, for employees or applicants who hold positions requiring a national security clearance, and for employees working at financial institutions. Violations would allow for awards of attorneys’ fees, costs, and double damages when a violation is willful or knowing.
ClearStar is a global Human Resources technology company specializing in background checks, drug testing, and occupational health screening. ClearStar also offers credit history searches when allowed by applicable law to help employers make compliant and informed hiring decisions. To learn more about ClearStar, please contact us.
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