Illinois Appellate Court Analyzes Retailer’s Use Of Credit History In Employment Decision

Posted: October 13, 2016

On September 27, the Illinois First District Appellate Court found a nationwide retailer’s use of credit history information in a hiring decision violated Illinois’ credit discrimination law titled, “Employee Credit Privacy Act.”

Illinois “Employee Credit Privacy Act”

For background purposes, the “Employee Credit Privacy Act” took effect on January 1, 2011 and prohibits employers1 from failing or refusing to hire or otherwise discriminate against an individual based on credit history information. Further, employers may not inquire into or obtain an individual’s credit report. With that said, employers may obtain credit history if it is “an established bona fide occupational requirement of a particular position or a particular group” of employees. For a bona fide occupational requirement to exist, one of the following must be true:

  1. State or federal law requires bonding or other security covering an individual holding the position.
  2. The duties of the position include custody of or unsupervised access to cash or marketable assets valued at $2,500 or more.
  3. The duties of the position include signatory power over business assets of $100 or more per transaction.
  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 in administrative rules, if any, that the U.S. Department of Labor or the Illinois Department of Labor has promulgated to establish the circumstances in which a credit history is a bona fide occupational requirement.
  7. The employee’s or applicant’s credit history is otherwise required by or exempt under federal or State law.

Case History & Court Findings

The case in question addresses the retailer’s hiring practices, particularly the use of credit history information for certain positions. After the plaintiff applied for an entry-level position, she was interviewed and offered a position contingent on the successful completion of a background check which included a credit check. Based on the results of the credit check, the retailer revoked her offer prompting the plaintiff to sue.

The retailer claimed conducting the credit check complied with the Act as the position gave the employee access to personal and confidential customer information. For example, one of the sales associates’ duties was to encourage customers to open store credit cards. The credit card applications included sensitive personal information such as date of birth, Social Security Numbers and driver’s license information. Further, the associates allegedly had custody of cash valued at $2500 or more based on merchandise cost and sales. The trial court agreed the retailer correctly relied on the exemption that specifically deals with access to personal or confidential customer information and granted summary judgment.

Upon appeal, the Appellate Court analyzed the word “access” in order to determine if the exemption was properly applied. In considering a proper definition, the Appellate Court turned to the Senate floor discussion of the legislation in 2010. During this discussion, one senator replied to a question stating there was no legislative intent for the “personal or confidential” exemption to apply to the use of cash registers or handling of credit cards. After considering this dialogue, the Appellate Court found no distinction between being handed a credit card and receiving a credit card application.

Additionally, the Appellate Court determined that simply acting as a conduit for the application – obtaining it and providing it to the cash office – was insufficient to meet an acceptable definition of “access”. The Appellate Court noted that to find otherwise would offer a broad interpretation of the exemption that the legislature did not intend. Accordingly, the Appellate Court held the retailer did not maintain its burden of proof that an exemption applied to the plaintiff. The case was reversed and remanded back to the lower court for further proceedings.

Employers conducting credit checks in Illinois should review this case in consultation with qualified legal counsel to determine if they are truly meeting the exemptions and legislative intent of the Act.

1 Under the Act, the definition of “employer” does not include: any bank holding company, financial holding company, bank, savings bank, savings and loan association, credit union or trust company; any company authorized to engage in any kind of insurance or surety business pursuant to the Illinois Insurance Code; any state law enforcement or investigative unit; any state or local government agency that otherwise requires use of credit history; or any entity that is defined as a debt collector.

TO PAGETOP