D.C. Restricts Use of Credit Information in Employment Decisions

*Portions of this blog were originally posted on Hunton Employment and Labor Law Persectives website, written by Sara Hamilton and Thomas P. Murphy.

The District of Columbia joins a dozen other jurisdictions across the country that prohibit an employer’s use of credit information as part of an applicant's background check used for employment decisions.  The new law, D.C. Act 21-673, amends the District of Columbia’s existing human rights law by adding credit information as a prohibited basis for discrimination for any employment decision (not just hiring) and applies to employers of any size.  

According to a 2012 SHRM survey, 47% of employers check potential employees’ credit reports as part of the hiring process. The District of Columbia joins at least eleven other states and two cities In seeking to eliminate or regulate this practice. Numerous other jurisdictions have also considered, or are considering, similar laws restricting the use of credit reports as part of the hiring process. 

The new District of Columbia law is broad. It purports to prohibit any type of inquiry, oral or written, whether pre- or post-offer, into an employee’s “credit information,” which is now defined as “any written, oral, or other communication of information bearing on an employee’s creditworthiness, credit standing, credit capacity, or credit history.”  

Unlike similar laws, the District of Columbia’s law also extends to the use of credit information for employment decisions beyond hiring, including compensation, promotions, and other privileges or terms of employment.

Despite this breadth, it also contains seven exemptions, including for financial institutions (if the employee has access to personal financial information), and for employers whose employees require security clearances. The new law also does not preempt existing District of Columbia laws that require employers to obtain credit information about its employees. Exempt employers must also still comply with the federal Fair Credit Reporting Act in administering any credit inquiry.

The District of Columbia Commission on Human Rights (“Commission”) is now empowered to levy fines for violations. It may, after making findings of law and fact, order offending employers to pay employees a fine of $1,000 for the first offense, $2,500 for the second, and $5,000 for each subsequent violation.

Employees in D.C. also have a private cause of action and can proceed directly to court without first exhausting administrative remedies.  

D.C enacted the restrictions on the use of credit information in employment decisions March 17, 2017.