What's Happening?
In Wisconsin, employers are permitted to conduct background checks that include credit history as part of their hiring process. This practice, however, has raised concerns among experts about its fairness and relevance to job performance. According to employment
attorney Nick Raef, credit reports may not accurately reflect an individual's ability to perform well in a job, as they can be influenced by factors such as domestic abuse or unfortunate circumstances. The Fair Credit Reporting Act mandates that employers must obtain written permission from applicants before conducting such checks. Additionally, if an employer decides to take adverse action based on a credit report, they must provide a pre-adverse action notice and allow the applicant to respond. In Madison, stricter regulations apply, as credit history is considered a protected characteristic under the city's equal opportunity ordinance.
Why It's Important?
The use of credit history in employment decisions can perpetuate a cycle of disadvantage for individuals with poor credit, potentially due to circumstances beyond their control. This practice may disproportionately affect low-income workers, who are more likely to have imperfect credit records. As a result, individuals who are most in need of employment opportunities may find themselves excluded from the job market, exacerbating their financial difficulties. The debate over the relevance of credit checks in hiring highlights broader issues of fairness and bias in employment practices. It also underscores the need for clear regulations to protect job seekers from potential discrimination based on their financial history.
What's Next?
As discussions around the fairness of credit checks in employment continue, there may be increased calls for legislative action to restrict or regulate this practice more stringently. Employers may need to reassess their reliance on credit history as a hiring criterion and consider alternative methods for evaluating candidates. Additionally, job seekers are encouraged to proactively manage their credit reports and seek legal advice if they believe their credit history has been used inappropriately in employment decisions. In Madison, individuals can file complaints with the city's Department of Civil Rights if they suspect violations of the equal opportunity ordinance.
