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Legal Updates

Massachusetts Poised To Restrict Employers' Use of Consumer Credit Reports

Massachusetts is poised to enact a new law which would substantially limit employers’ ability to conduct certain types of background screenings on applicants and current employees.

If passed and signed into law, the legislation will create a new Section 51C under the Massachusetts Consumer Protection Law, Chapter 93A, prohibiting employers from requesting or using credit information about applicants and current employees in almost all circumstances.

The Massachusetts House of Representatives approved the proposed legislation this past March, and the state Senate is considering a virtually identical bill. Governor Healy has indicated her intention to sign the legislation into law when it reaches her desk.


It’s a given: Employers need to fill vacancies. Employers need to decide who to promote. Employers need to consider who to retain. And employers need to decide who to reassign.

Often, in making these hiring decisions, employers turn to a third-party company – generally a private consumer reporting agency (“CRA”) – to conduct employment background checks on the individuals under consideration. Employment background checks may include information about an individual’s employment history, education history, criminal history, credit history, and motor vehicle reports.

Employers often look to the consumer credit portion of a background check for signs of potential problems – e.g., a pattern of late payments that might indicate disorganization or irresponsible behavior, a pattern of failing to live up to agreements, or evidence of excessive debt, which may be a marker of financial distress and, in an employer’s eyes, increase the risk of theft or fraud.

When an employer uses a CRA to carry out such background checks, the employer must comply with the federal Fair Credit Reporting Act (“FCRA”). The FCRA establishes a minimum “floor” for how CRAs, and employers who get consumer credit reports from CRAs, must behave to promote accuracy, fairness, and privacy. Many states, including Massachusetts, impose additional requirements under their own versions of the FCRA.

Over the past several dozen years, however, because of significant inaccuracies in the information appearing in consumer credit reports, background checks have faced growing public skepticism. Further, critics have argued that no clear link exists between an individual’s creditworthiness and credit history and the individual’s ability to perform most jobs.

Based on such concerns, several states have enacted laws limiting employers’ right to obtain or use applicants’ or employees’ credit information for employment purposes. The proposed Massachusetts law would be one of the most restrictive laws in the U.S. on this topic.

Prohibitions Under The Proposed Massachusetts Law

If enacted, the new Massachusetts legislation will bar organizations from requesting from a CRA a consumer credit report that bears on an individual’s “credit worthiness, credit standing or credit capacity” for “employment purposes” – e.g., employment, promotion, reassignment, or retention as an employee.

And, unlike the Massachusetts “ban-the-box” law – which allows a narrow inquiry about criminal history after a conditional employment offer has been made – Section 51C does not permit an employer that has extended a conditional offer to ask the individual about information contained in a consumer credit report regarding the individual’s “credit-worthiness, credit standing, or credit capacity.”

Exemptions under the proposed Section 51C are very limited. In its current form, the legislation exempts federally insured credit unions and any national securities exchange, registered securities association, or registered clearing agency. (While the current version of the bill does not contain such a provision, we believe it likely that an exemption will be incorporated for federally insured depository institutions – viz., banks.) The legislation would also exempt employees or applicants who hold positions which require a national security clearance.

Section 51C also contains anti-retaliation and anti-discrimination provisions, which track similar employment discrimination laws and would prohibit an employer from taking adverse action against an individual because of the individual’s (i) filing a complaint under the new law, (ii) participating in a proceeding concerning an alleged violation of the new law, or (iii) opposing any action made unlawful under the proposed legislation.

Finally, Section 51C would prohibit waivers of an applicant’s or employee’s rights under the new law.

What Should Employers Do?

With the passage and enactment of this new Massachusetts legislation looming, employers should carefully review their job application forms and other onboarding documents and protocols, and, in conjunction with experienced employment counsel, determine how those documents and protocols will need to be modified to align with the new Section 51C.

Additionally, employers should train all HR employees, supervisors and managers to ensure that they follow the requirements of the new statute at each stage of the employment cycle – from recruiting through the end of the individual’s employment with the organization.

Employers should also be aware of potential issues involving the interstate applicability of the proposed legislation:

  • We anticipate that Section 51C likely will apply to applicants and employees who reside outside of Massachusetts and work (or apply to work) for Massachusetts-based employers.
  • It also seems very likely that Section 51C will apply to non-Massachusetts-based employers who hire and employ individuals who live and work inside the Commonwealth.

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Please feel free to reach out if you have questions about this proposed change to Massachusetts law or any related hiring issues.