News & Resources

California credit check legislation unlikely to affect small firms

Oct 21, 2011 Matt Roesly

This month, the state of California passed a bill that limits employers' ability to access individual credit reports in assessing job candidates. The move is being championed by civil rights and labor groups as a win in helping under-served or financially disadvantaged job-seekers find employment. State assemblyman and bill sponsor Tony Mendoza has called the credit checks a "needless catch-22 that occurs when those seeking work to pay their bills cannot find it due to poor credit," according to The Wall Street Journal. However, critics maintain the lack of credit background check may hinder the job market, especially for positions that involve the handling of cash. Nonetheless, small business recruiting and employment experts maintain that the bill is unlikely to impact small firms, which do not often rely on credit checks for job candidates. On the contrary, larger firms are more likely to leverage such data in making a hiring decision. "According to a survey last year … by the Society of Human Resource Management, only about 7 percent of employers with fewer than 99 employees use background credit checks in hiring decisions," reports Angus Loten for the WSJ, "compared with 65 percent at companies with more than 500."