When making personnel decisions, such as hiring, promotion, or reassignment, employers often seek to examine the background of the applicant, including the applicant’s credit history or criminal history. However, there is an ever-growing array of Federal, state and local laws and regulations that limit if or when employers may consider this information. Furthermore, under Title VII, an employer must also consider whether examining the arrest or conviction records of applicants could lead to direct or indirect discrimination.

Credit Histories

Under both Illinois and Federal law, an employer is restricted as to if, or when, it can inquire into an applicant’s credit history. The Illinois Employee Credit Privacy Act, 820 ILCS 70/1, et seq, (“ECPA”), provides that an employer may not order an applicant or employee’s credit report, inquire about the applicant’s employment history, or otherwise discriminate against an individual on the basis of his or her credit history or credit report unless the position in question meets certain criteria. 820 ILCS 70/10. Exempted from these requirements are employers in the financial and insurance industries and certain governmental employers. Otherwise, in order to inquire into applicant’s credit history, a satisfactory credit history must be an “established bona fide occupational requirement” of the position. The statute elaborates on several duties which meet this criteria, including having management responsibilities; custody or unsupervised access to cash or marketable assets valued at $2,500 or more; or having access to confidential information, financial information or trade secrets. 820 ILCS 70/10(b).

Recently, Illinois courts have demonstrated that they will construe these factors narrowly in order to discourage the use of pre-employment credit checks for positions that do not clearly fall within an exemption. In Ohle v. The Neiman Marcus Group, 2016 IL App (1st) 141994, the plaintiff was denied an entry-level position as a “Dress Collections Sales Associate” on the basis of her credit check. Neiman Marcus claimed that the sales associate fell within one of the listed exemptions to the ECPA because the position would have given the plaintiff “access” to personal and confidential consumer information when she accepted store credit card applications from customers. Id. at ¶11. The court found that the employees were merely acting as “conduits” for the information and that this does not qualify as “access” under the ECPA. The court cautioned that the purpose of the ECPA is to “help those who have fallen on hard times find employment” and that an employer cannot find an exception under the ECPA for a position that consists of “performing simple tasks at the cash register.” Id. at ¶40.

Even if an employer can meet one of the exemptions of the ECPA, it must also meet the disclosure and reporting requirements set by the Fair Credit Reporting Act, (FCRA), 15 U.S.C. Sect. 1681, et seq. The FCRA sets out three stages of disclosure and reporting that must be met by employers who seek to obtain a “consumer report” for a job applicant.

Under the FCRA, the employer must make certain disclosures to applicants prior to obtaining a consumer report. Specifically, the employer must make a clear and conspicuous disclosure in writing, in a separate document that consists only of the disclosure, that a consumer report may be obtained for employment purposes, and the applicant must authorize the procurement of the report in writing. 15 U.S.C. Sect. 1681b(b)(2)(A). If the consumer report forms the basis for an adverse employment decision, either in whole or in part, the employer must provide the applicant with a copy of the report and “A Summary of Your Rights Under the Fair Credit Reporting Act.” 15 U.S.C. Sect. 1681b(b)(2)(B). The statute is silent as to how long the employer must wait after providing the applicant with notice before taking the adverse employment decision, or as to whether it has any duty to reconsider this decision if the applicant contacts the employer. If the employer fails to provide the applicant with any of the pre-adverse decision disclosures and information, the applicant may file a private suit15 U.S.C. Sect. 1681n-o. If the employer moves forward with the adverse employment action, it must provide additional written notice to the applicant, which must contain a statement of the applicant’s rights to obtain a free copy of the report and dispute the accuracy or completeness of its information. 15 U.S.C. Sect. 1681m.

“Ban-the-Box” Laws

In addition to restrictions on the use of credit reports in employment screening, there has been a recent rise in “ban-the-box” laws which typically delay when an employer may access information regarding the applicant’s criminal history.

The Illinois Job Opportunities for Qualified Applicants Act, 820 ILCS 75/1 et seq., prohibits an employer from considering or inquiring into an applicant’s criminal record or history until after the applicant has been notified of an impending interview or, if no interview is to take place, until after a conditional offer of employment has been made. 820 ILCS 75/15.

There are exceptions to this prohibition if (i) the employer is required by federal or state law to exclude applicants with criminal convictions, (ii) a fidelity bond is required for the position and the applicant’s criminal history would disqualify the applicant from receiving the bond, or (iii) where the position requires licensing under the Emergency Medical Services Systems Act. 820 ILCS 75/15(b)(1)-(3).

Employers should also keep in mind Federal and state law prohibiting “disparate treatment” and “disparate impact” employment discrimination. For example, disparate treatment discrimination in violation of Title VII occurs where the employer rejects an African American applicant on the basis of his criminal record, but hires a similarly situated white applicant with a comparable criminal record. EEOC Enforcement Guidance: Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII and the Civil Rights Act of 1964, (https://www.eeoc.gov/laws/guidance/arrest_conviction.cfm) (last visited on November 15, 2016). Furthermore, if an employer’s policy or practice significantly disadvantages individuals of a particular race, national origin or other protected characteristic, the employer must be prepared to justify the policy or practice and demonstrate that the exclusion is “job related and consistent with business necessity” for the position. Id.

This myriad of laws and regulations should caution employers to carefully develop any pre-employment screening process that considers an applicant’s credit or criminal histories so that it is compliant with applicable law and tailored to the duties and requirements of the specific position. 

Lauryn E. Parks is an associate attorney with Momkus McCluskey, Roberts, LLC.