New Maryland Law Prohibits Employer Use of Applicant and Employee Credit Information

Many employers require applicants to sign forms providing authorization for the employer to access an employee's credit report — particularly in the banking and financial services fields. When negative information is uncovered, such as poor credit or bankruptcy, that information is often used as the basis for denying employment.

However, effective October 1, 2011, a new law will severely constrain the ability of Maryland employers to request or use an applicant's or employee's credit report or credit information to make employment decisions. The Job Applicant Fairness Act applies to all employers (with several exceptions outlined below) and allows an employer to request or use an applicant's credit information only after an offer of employment has been made. Even then, credit information cannot be used: (i) to deny employment; (ii) as the basis for terminating the employee; or (iii) to determine the terms, conditions or privileges of employment, such as the employee's salary level.

Although most employers will be required to comply with this new law, the Job Applicant Fairness Act does not apply to various financial institutions, as well as employers who are required to inquire into an applicant's or employee's credit history under federal or state law.

The Act does not provide a private right of action — i.e. individuals cannot sue for violations. Rather, a complaint must be filed with the Commissioner of Labor and Industry who can assess a civil penalty of up to $500 for an initial violation and up to $2500 for repeat violation.

For more information, see House Bill 87.