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Background checks: Of job applications and credit checks

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Here’s a case I hope you find interesting. It sure seems curious to me.

In 2006, Mark’s Work Wearhouse in Alberta started running background credit checks on employees looking for work at the clothing store. Not criminal record checks; not general reference checks; credit checks.

Last Friday, Christina discussed the difficulties that employers go through when they approach reference employers to do background checks on prospective employees. Employers might very well want to know about those difficulties, because it’s reasonable for them to look for information that is relevant to a potential employee’s performance in a particular job.

It’s more difficult to justify collecting credit information on candidates or employees, at least when the job in question is middle-of-the-road retail. Mark’s seems to have missed this little fact until it faced a complaint to Alberta’s Privacy Commissioner. Performing background checks on prospective employees’ credit runs counter to the province’s Personal Information Protection Act, which applies to private sector businesses in the province.

Of course, the retailer defended its practice, saying:

Credit history information can provide insight into an applicant’s tendency to meet financial obligations as well as his or her current financial pressures. The way in which individuals handle their own funds can often be a reflection of how they will handle the financial responsibilities and tasks associated with their employment duties.

[Sales Associates] at Mark’s are often in a position to handle cash while completing merchandise transactions and … may also have access to the store safe, security codes, petty cash and the store itself during off hours.

In other words, the company wanted to avoid hiring Sales Associates it thought would be more likely to steal. While this case isn’t a human rights decision, I think Mark’s should have seen a problem right there. Maybe they should have asked why similar companies aren’t doing this sort of loss-prevention.

The Privacy Commissioner disagreed with the company’s defence, finding no reasonable connection between an individual’s personal credit information and her or his ability to perform the duties of a Sales Associate. Mark’s simply failed to provide a reasonable connection between its collection of the credit information and its purposes for collecting the information.

Thus, the commissioner recommended that Mark’s Work Wearhouse stop conducting the pre-employment credit checks, which it did.

Organizations must remember that they may only collect personal information for reasonable purposes. What I found curious is that Mark’s—or their lawyers—didn’t recognize that the company’s credit-check practice was questionable at best. Maybe it’s not so obvious, but it seems pretty clear to me that credit information cannot form the basis of a hiring decision (except in very specific circumstances).

What do you think—should employers be allowed to conduct background checks on prospective employees’ credit? Does a person’s credit record say anything about her or his ability to perform a job securely? Or is the idea simply discrimination under a different guise?

Also, if you don’t want to get caught in a similar scenario, here are some other—legal—things you can do about employee theft.

Adam Gorley
First Reference Human Resources and Compliance Assistant Editor

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Adam Gorley

Adam Gorley is a copywriter, editor and researcher at First Reference. He contributes regularly to First Reference Talks, Inside Internal Controls and other First Reference publications. He writes about general HR issues, accessibility, privacy, technology in the workplace, accommodation, violence and harassment, internal controls and more. Read more
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4 thoughts on “Background checks: Of job applications and credit checks
  • kevin p. baxter says:

    Just a heads up…. I have had an individual with the same name as me but a birthday in a different month and day two years older use my information from a Sayreville police officer in a traffic stop. The individual said he was from my address and now he is serving time for first degree car-jacking. I have had to go to many different municipal authorities in reference to other crimianl complaints that were sent to my home and had to appear etc etc. He is a different color than me also. His wife having a different last name worked at car rental facility which may also how he knew of my personal information. Its been a mess…. I am happy that the fingerprint and other information tracks my issues to be sure I am not hampered from getting my job/jobs which are being applied for. Its sad that my name is in the HALL OF RECORDS with my bithday on the information stored as being a different color with my own birth year….MOTORVEHICLE and I had a sit down and there was no confusion on that end, but the issue that the other person has multiple addresses and multiple social security numbers is amazing.

  • Shaz says:

    Shaz offered this further comment via e-mail (and to respect his privacy, I asked if I could repost it here, which he accepted).

    Yes your opinion matters, I love intelligent opinions. Don’t get me wrong, a part of me agrees with you as the credit check in some ways insinuates that those on a lower income scale are more likely to steal and we have all seen high paid white collar criminals refute that mentality. Also, many people have bad credit simply due to hard times, spousal mismanagement etc and they would never steal what isn’t theirs. However, my 2 biggest beefs with this issue is that the government will do this very same check with a vengeance and not have to justify it but others will get dragged through Human Rights, Labour Boards etc.. The other is that there is little to no protection for the employer, there is too much bias, abuse of power and bleeding heart mentality at the level of the labour ministries which hinder or prevent employers from protecting themselves once they find they have hired a bad employee. So, until the government evens the playing field on both counts employers become desperate to protect themselves, and they should not be ignored because without employers there would be no employees.



  • Adam Gorley says:

    Thanks for your comment Shaz. You’re right; I was too general, and I’ve edited the text appropriately, I hope.

    My opinion, if it matters, is that basing a hiring or promotion decision on a person’s credit history is discriminatory, but there are always exceptions.
    Maybe a special limited credit report should be available for prospective employers. I don’t know the answer.

    Thanks again for your comment!

  • Shaz says:

    Your article states; ‘the company wanted to avoid hiring Sales Associates it thought would be more likely to steal. While this case isn’t a human rights decision, I think Mark’s should have seen a problem right there. Maybe they should have asked why no other companies are doing this sort of loss-prevention’

    The very last line is a little too general to say ‘NO OTHER’ because our very own government does it on a regular basis for the very same reason. Even if you are not an OLG direct employee but hold a certain key licence to oversee the bar on a premises that houses OLG slots your are sujected to a MANDATORY evaluation by OPP officers who not only check if ANY police calls were ever made by/against you but they know and reveal, to the penny, what is in your bank accounts etc. And, this process is repeated every 5 years without fail. So I say this, as long as our government can assess a bar tender’s credit history and bank savings to determine their level of ‘liklihood to steal’ then so should this be allowed for every employer who must trust people to work with their money. Let’s face it, if they can’t be cautious prior to hiring they are done for if anything goes wrong because often these theiving culprits are protected under the skirt of the Ontario Ministry of Labour who spend a great deal of energy protecting the employee even if they are at fault.