NEW LIMIT ON MARYLAND EMPLOYERS’ RIGHT TO DO CREDIT CHECKS ON APPLICANTS – BIG BROTHER STRIKES AGAIN!
By Howard K. Kurman, Esq.
Our employer-friendly (not!) legislature in 2011 enacted legislation ( the “Job Applicant Fairness Act”) that drastically reduces the opportunity that Maryland employers have to conduct credit checks on job applicants. This law that officially went into effect on October 1, 2011, in general, restricts the right of Maryland employers to obtain and use credit checks as part of their normal routine pre-hire routine, or indeed as part of their analysis of fitness for incumbent employees.
The new law which is now part of Section 3-711 of Maryland’s Labor and Employment Article, specifically excludes those employers that are required to check into an applicant’s or employee’s credit report or credit history under any applicable federal or state law; financial institutions that accept deposits that are insured by a federal agency (or an affiliate or subsidiary of such financial institution); credit unions, and certain investment advisors (“an entity, or an affiliate of the entity that is registered as an investment advisor with the SEC”).
The statute provides that, unless otherwise permitted (as explained below), Maryland employers may not use an applicant’s or employee’s credit report or history for purposes of: denying employment to an applicant; discharging the employee; or determining such individual’s compensation or terms, conditions, or privileges of employment.
The legislature did provide that Maryland employers may use credit reports or histories if the employer has a “bona fide purpose for requesting or using information in the credit report or credit history that is: a) substantially job-related; and b) disclosed in writing to the employee or applicant. Naturally one may question what the legislature meant when it allowed any credit inquiry if it is job-related”. According to the statute, employers apparently can request such information for positions that are “managerial” and involve setting the direction or control of a business or a department, division, unit, or agency of a business (seemingly similar to the definition contained in the FMLA for “executive” employees); or involves access to personal information ( such as social security numbers or financial account numbers) of customers or employees (of the type not customarily provided in a retail transaction); the position involves a fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money, or enter into contracts; or is provided an expense account or a corporate debit or credit card; or has access to sensitive company confidential/proprietary information.
Any applicant/employee who believes that he/she has been the victim of improper use of credit information under the statute may file a complaint with the Maryland Department of Labor, Licensing and Regulation (DLLR). Penalties to be assessed by the DLLR after conducting investigations include a civil penalty of up to $500 for an initial violation of the Act, with up to a $2500 maximum penalty for repeat violations.
Obviously, under the new law unless employers fall into one of the excluded categories specifically described in the statute, the use of credit information or history may be problematic unless it is being acquired pursuant to one of the specific and permissible reasons cited in the statute. Employers should carefully analyze whether such information is really needed to assess the employability of applicants or the continued fitness for employment of incumbent employees. Because this is a new statute, obviously there is no present guidance as to how the DLLR will enforce it, but if history teaches us anything, Maryland employers should realize that the fact that the statute is newly enacted will not necessarily protect them from zealous representatives of the Agency who will narrowly construe the statute in favor of a restrictive use of any credit checks.
Significantly, this statute does not preclude the continued use of background information which is acquired under the Fair Credit Reporting Act, but such reports, at least with regard to Maryland applicants/employees, cannot contain credit information that is violative of the new State statute.
For further questions regarding practical application of the new statute please contact Howard K. Kurman at 443.738.1517 or hkurman@offitkurman.com.