Earlier this month, the Mayor of Philadelphia signed legislation regulating the use of credit checks in employment decisions.  By enacting this legislation, Philadelphia joins a growing cast of cities and states throughout the country prohibiting employment credit checks in certain instances.  When coupled with recent federal Equal Employment Opportunity Commission enforcement actions against employers based on the use of credit information in hiring decisions, multistate employers need to be increasingly vigilant in when and how they use credit information for employment purposes.

The Philadelphia legislation amends the portion of the Philadelphia Code entitled “Fair Practices Ordinance: Protections Against Unlawful Discrimination” by adding a section prohibiting employers from obtaining or using credit checks in the hiring process in certain instances.  Specifically, the ordinance restricts the use of “credit information,” which it defines as “[a]ny written, oral, or other communication of information regarding a person’s debt, credit worthiness, standing, capacity, score or history, payment history, charged-off debts, bank account balances or other information, or bankruptcies, judgments, liens, or items under collection.”

According to the new law, it is now an unlawful employment practice in Philadelphia to use “credit information” regarding an employee or applicant “in connection with hiring, discharge, tenure, promotion, discipline or consideration of any other term, condition or privilege of employment with respect to such employee or applicant.”  This restriction does not apply, however, to a number of enumerated types of employment positions.  For example, it does not apply to “any law enforcement agency or financial institution,” certain supervisory or managerial jobs, and certain jobs with significant financial responsibility, to name a few.

Philadelphia’s ordinance should serve as a reminder to employers, especially multistate employers, to ensure that their credit and background check policies on applicants comply with federal, state, and now local law.  More than 100 cities and counties, and numerous states, have now passed legislation governing the obtainment of credit checks and background checks.  Many states and localities have also adopted laws specifically regulating the use of credit information, in addition to “ban the box” laws regulating an employer’s ability to inquire about an applicant’s criminal history. Troutman Sanders has extensive experience in counseling companies on credit and background screening compliance, including the Fair Credit Reporting Act, ban the box legislation, restrictions on the use of credit information, and other state and local laws.