Illinois Prohibits Use of Credit Information in Employment Decisions With Limited Exceptions: Illinois Joins Oregon, Washington & Hawaii in Restricting Use of Credit Information

Recognizing the increasing impact of the economic downturn on employees’ credit histories, Illinois has become the most recent state to restrict employers from using credit information in employment decisions. 

On August 10, 2010, Governor Quinn signed the Employee Credit Privacy Act (H.B.  4658) into law.  The Act prohibits most employers from using an applicant’s or employee’s credit history or other credit information as a factor in any employment decision (e.g., hire, discharge, terms of employment).   The Act also prohibits employers from inquiring into an applicant’s or employee’s credit history or obtaining a credit history report from a consumer reporting agency.   The Act restricts use of a broad range of credit information regardless of the source of such information; it is not limited solely to information obtained from a consumer reporting agency. 

The Act applies to employers of any size, but certain employers are specifically excluded from the Act’s coverage.  Many governmental employers, as well as banks, savings and loan associations, other financial institutions, debt collectors, insurance companies and surety businesses are specifically excluded from the Act’s prohibitions.

The Act also provides limited exceptions that allow employers to use credit information where such information is related to a “bona fide occupational requirement” for a particular position or group of employees.  The bona fide occupational qualification applies generally to those positions involving money-handling or other confidential job duties.  For instance, employers may use credit information for employees whose duties: require bonding by state or federal law;  have unsupervised access to cash or certain assets valued at $2500 or more; have signatory power of $100 or more per transaction; are in a managerial position which involves setting direction or control of the business; or involve access to confidential information, financial information, or trade secrets. The Act includes other limited exceptions and contemplates that future administrative regulations may define additional categories of bona fide occupational requirements permitting exceptions to this Act.  Notably, the Act specifically incorporates BFOQ definitions from either the state or federal Departments of Labor.  

Employers may not retaliate or discriminate against a person for exercising rights under the Employee Credit Privacy Act.  Employers who violate the Act may be sued and ordered to pay damages including attorneys’ fees.  Further, the Act does not allow waivers of the Act’s rights and invalidates any such waivers that exist.

The effective date of the Act is January 1, 2011.  Accordingly, employers who use credit history as part of a background check or other hiring processes should take stock of their policies in light of the shifting tide against use of such information.

For more information, please contact the Seyfarth attorney with whom you work or any Labor & Employment attorney on our website.