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Illinois Employers Face New Restrictions on Use of Credit History

Labor & Employment Alert Brian A. Hartstein, Jeffrey S. Piell

On August 10, 2010, Illinois enacted the Employee Credit Privacy Act (the "Act"). The purpose of the Act, which goes into effect on January 1, 2011, is to prohibit certain Illinois employers from using the "credit history" of an employee or prospective employee as a consideration for employment, recruitment, discharge, compensation or to otherwise affect an employee's terms or conditions of employment, unless the job in question fits within an exception contained in the Act for certain types of positions. In particular, covered employers are prohibited from inquiring into an applicant's or employee's credit history or obtaining that information from a consumer reporting agency, unless the exception applies. The Act also prohibits employers from retaliating against employees for filing a complaint or participating in an investigation of an alleged violation of the Act.

For purposes of the Act, "credit history" is defined as "an individual's past borrowing and repaying behavior, including paying bills on time and managing debt and other financial obligations." Thus, the Act does not preclude employers from inquiring into an employee's or applicant's criminal background.

The Act permits employers to inquire into an applicant's or employee's credit history when having a satisfactory credit history is a bona fide occupational qualification ("BFOQ") for the job in question. The Act sets out specific types of occupational requirements that may qualify as a BFOQ:

  1. State or federal law requires bonding or other security;

  2. The duties of the position include custody of or unsupervised access to cash or other marketable assets worth
    over $2,500;

  3. The duties of the position involve signatory powers of assets of $100 or more;
  4. The position is a managerial position which involves setting the direction or control of the business;
  5. The position involves access to personal or confidential information, financial information, trade secrets, or state or national security information;
  6. The position meets criteria established by the Illinois Department of Labor (the "Illinois DOL"). The Illinois DOL has not yet issued implementing regulations establishing such criteria; and/or
  7. Under state or federal law, the employer is either specifically authorized to obtain or exempt from restrictions on obtaining an employee's or applicant's credit history.

In addition, employers in various industries are specifically exempt from the Act. including financial holding companies, banks, savings and loans, credit union and trust companies, insurance or surety businesses, state law enforcement or investigative units, state or local government agencies which require use of credit history or credit reports, and debt collectors.

Before the new year, covered Illinois employers who do not fall within one of these business exemptions should stop using or performing credit checks on their employees and applicants, except for those employees or applicants who are in or seeking jobs for which having a satisfactory credit history is a BFOQ. Those employers who are unsure whether  they may be exempt from the Act because they are in a exempt industry or who are unsure about whether obtaining a credit check for a particular employee or applicant is permissible based on a BFOQ should consult with an attorney to ensure compliance with the new law. If you have any questions about these issues or if you would like assistance in reviewing your credit check policies and practices, please contact Brian Hartstein at (312) 715-5211 / brian.hartstein@quarles.com, Jeffrey Piell at (312) 715-5216 / jeffrey.piell@quarles.com or your Quarles & Brady Labor & Employment attorney.