On April 12, 2011, Maryland Governor Martin O’Malley (D) signed the Job Applicant Fairness Act (the Act) into law, making Maryland the fifth state, along with Hawaii, Illinois, Oregon, and Washington, to limit the right of employers to use credit reports in making employment decisions. The law becomes effective October 1, 2011.

General Restrictions

The Act generally prohibits employers from using an applicant’s or an employee’s credit report or credit history in determining whether to deny employment to the applicant, discharge the employee, or determine compensation or the terms, conditions, or privileges of employment.

An employer will, however, be able to request or use an applicant’s or an employee’s credit report or credit history if the applicant has received an offer of employment and the report or history will be used for a purpose not prohibited by the Act.

Exceptions for “Bona Fide Purposes” that are “Substantially Job-Related”

Moreover, an employer may request or use a credit history or report if the employer has a “bona fide purpose” that is “substantially job-related” and the purpose is disclosed in writing to the applicant or employee. A position for which an employer has such a bona fide purpose includes a position that:

• is managerial and involves setting the direction or control of a business, or a department, division, unit or agency of a business;
• involves access to personal information, as defined by Maryland’s Commercial Law, of a customer, employee or employer, except for personal information customarily 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;
• is provided an expense account or a corporate debit or credit card; or
• has access to trade secrets or other confidential business information.

Excluded Employers

The Act will not apply to an employer that is required to inquire into an applicant’s or employee’s credit report or history under federal or state law for employment purposes; to a financial institution that accepts deposits that are insured by a federal agency or by an affiliate or subsidiary of the financial institution; to a credit union share guaranty corporation approved under Maryland law; or to an entity or an affiliate of an entity that is a registered investment advisor with the US Securities and Exchange Commission.

Background Checks Still Generally Permissible

It is important to note that the Act expressly states that it does not prohibit an employer from performing an employment-related background investigation that includes use of a consumer report or investigative consumer report authorized under the federal Fair Credit Reporting Act, provided it does not involve the investigation of credit information.

Enforcement

Notably, the Act does not provide individual applicants or employees with a private right of action against employers who violate its provisions, although earlier versions of the proposed law did so.

Instead, an applicant or employee may file a complaint against an employer with the Maryland Commissioner of the Department of Labor and Industry. If after an investigation the Commissioner determines that the employer willfully or negligently violated the Act, he or she must try to resolve the matter informally, and if unable to do so may assess a civil penalty of up to $500 or an initial violation and up to $2,500 for a repeat violation. The employer may request a de novo administrative hearing to challenge the penalty.

If you have any questions about the Act, please contact the author or any other member of the Arent Fox Labor & Employment Law Group.

Michael L. Stevens
stevens.michael@arentfox.com
202.857.6382