New Maryland Laws Restrict Employers’ Use of Credit Reports and Otherwise Affect Employers

April 22, 2011

The Maryland General Assembly passed the Job Applicant Fairness Act, a law that restricts employers’ use of credit reports in making employment decisions, during the legislative session that came to an end on April 12, 2011. Employers operating in Maryland need to be aware of this new legislation and modify their employment policies and practices accordingly before it goes into effect on October 1, 2011.

The Job Applicant Fairness Act

The Job Applicant Fairness Act was among the highest profile pieces of employment legislation to pass through the legislature during the recent session. The law generally prohibits employers from using a credit report to deny employment to a job applicant, discharge an employee, or make a determination as to an employee’s compensation or employment terms. There are, however, several important exceptions to the new law.

The law does not apply to employers required to perform credit checks under state or federal law, financial institutions that accept federally insured deposits or their subsidiaries and affiliates, certain credit unions, or investment advisors registered with the Securities and Exchange Commission. The law further permits all employers to use an applicant or employee’s credit report if:

  1. The applicant has received a job offer and the credit report will be used for a non-prohibited purpose; or
  2. The employer has a “bona fide purpose” for requesting or using the credit report that is substantially job related and disclosed in writing to the employee or applicant.

Positions for which an employer has a bona fide purpose for obtaining an employee’s credit report include those in which the employee:

  1. Is in a managerial role responsible for setting the direction or control of the business or a sub-unit thereof;
  2. Has access to certain personal information of a customer, employee or employer, such as a social security number or account number, except for personal information usually provided in a retail transaction;
  3. Has fiduciary responsibilities to the employer, including the authority to issue payments, collect debts, transfer money, or enter into contracts;
  4. Is provided an expense account or a corporate debit or credit card; or
  5. Has access to company trade secrets or other confidential business information.

In addition, the law is not intended to restrict employers from using non-credit information based background checks in accordance with the federal Fair Credit Reporting Act.

Employees or applicants that believe their employer or prospective employer violated the Job Applicant Fairness Act may file a complaint with the Maryland Commissioner of Labor and Industry. If the Commissioner believes a violation has occurred, it will try to resolve the dispute informally, and if that fails it may assess a civil penalty of up to $500 for an initial violation and up to $2,500 for repeat violations.

Other Laws and Legislative Defeats

During the just completed legislative session, the General Assembly also amended some of Maryland’s existing employment laws. Maryland’s Wage and Hour Law was amended to clarify and expand the forms of retaliation prohibited by the statute. The Wage Payment Collection Law was amended to provide that an agreement between an employer and employee to work for less than the wage required by the law is void. The General Assembly also amended Maryland’s unemployment insurance and workers’ compensation laws. It did not, however, amend Maryland’s anti-discrimination statute to include gender identity as a protected classification. That measure passed the House of Delegates, but died in the Senate’s Judicial Proceedings Committee and could be reintroduced during the next legislative session.

For additional questions, please contact any member of McGuireWoods’ Maryland Labor and Employment Law Team.