On July 13, 2011, Connecticut Governor Dannell P. Malloy signed S.B. 361, which bans almost all employers from requiring applicants or employees to submit to a credit check.  The law will be effective on October 1, 2011.

Under the law, it will be illegal for any employer, except for financial institutions, to require an applicant or employee to give consent for the employer to obtain a credit score, credit account balances, payment history, savings or checking account balances, or savings/checking account numbers. 

There are only three exceptions to the law for non-financial institution employers:

1.      The report is required by law;

2.      The employer reasonably believes that the employee has engaged in activity that is a violation of the law related to the employee’s employment; or

3.     Such report is "substantially related" to the employee’s current or potential job or the employer has a bona fide purpose for requesting or using information in the credit report that is job-related and disclosed in writing to the employee or applicant.

Employers should be careful before attempting to use number 3 above as catch-all permission.  The law specifically defines what it means to be substantially related.  The report will only be substantially related if one of the following applies to the position for which the employee or applicant is being considered:

• It is a managerial position involving setting the direction or control of a business, division, unit or agency of a business (in other words, a higher level manager);
• Involves access to customers’, employees’, or the employer’s personal or financial information other than what would be provided in a retail transaction;
• Involves a fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money or enter into contracts;
• Provides access to confidential and proprietary business information or trade secrets; or
• Involves access to the employer’s nonfinancial assets valued at $2500 or more

As we previously posted on March 22, 2011, the federal Equal Employment for All Act, if passed, would prohibit employers nationwide from using credit reports with regard to employment decisions.  As of this post, the bill is still sitting in committee.  But for now Connecticut employers should be prepared to change their hiring and promotion practices by October 1, 2011 to comply with the new Connecticut law.