Effective January 1, 2012, Labor Code section §1024.5 prohibits most California employers from obtaining a consumer credit report on a job applicant and/or employee, except in very limited circumstances. Beginning January 1, 2012, California employers may only obtain, or request, a consumer credit report on an employee, or prospective employee, if the employee falls into one of six categories, including:

1. An employee that qualifies for the "executive" overtime pay exemption;
2. An employee who the law otherwise requires the employer to perform a credit check;
3. An employee who has, or will have, regular access to bank and/or credit card account information, or the social security number and date of birth of the employer or any of its clients;
4. An employee who is, or will be, a signatory on the employer's bank or credit card account(s), authorized to transfer money on behalf of the employer, or authorized to enter into financial contracts on behalf of the employer;
5. An employee who is, or will have, regular access to $10,000 or more in cash belonging to the employer, or the employer's client(s); and
6. An employee that will or has access to "trade secrets" as defined in the California Civil Code.

If the employee, or prospective employee, falls within one of the above six (6) exemptions, the employer may still request a credit check, but must do so in compliance with all federal and state notice and procedural requirements. As to California's notice requirements, effective January 1, 2012 A.B. 22 amends California Civil Code §1785.20.5 to require the employer before obtaining a credit report to provide the prospective employee with advanced written notice identifying the specific basis under Labor Code section 1024.5(a) for use of the report. Existing state law further mandates that the written notice inform the prospective employee of the source of the report and contain sufficient space for the prospective employee to request a copy of the credit report. If the employer later makes an adverse employment decision based on information contained in the prospective employee's credit report (e.g. a decision not to hire), the employer is required to inform the applicant and provide the name and address of the consumer credit agency that provided the report.

It should be noted that California employers may, and most should, continue to check a prospective employee's references and where appropriate may want to conduct a criminal background check.