Massachusetts Ban on Credit Checks for Employment Purposes in Motion

Restrictions on access to records used for employment purposes that could unfairly sway hiring decisions remain a priority as local governments try to find more ways to protect employee rights and promote equality. On March 14, 2024, the Massachusetts House of Representatives passed a bill to ban credit checks as part of the employment process. This bill is currently awaiting the governor's signature and will significantly impact employer hiring practices throughout the state. We previously covered similar state-enforced restrictions on using credit reports and history in Rhode Island, Philadelphia, New York, California, and Vermont.

If passed by Governor Healey, this legislation would prohibit employers from obtaining or using credit reports for employment purposes. We will cover a few key restrictions and exceptions employers may want to consider when making employment decisions.

A quick overview of Chapter 93A amendments

The new legislation, Bill H.1434, would amend Title XV, Chapter 93 of the Massachusetts Annotated Laws to introduce a few key restrictions on using consumer credit reports for hiring purposes, including:

• Using credit report information as a factor in determining eligibility for employment, promotion, reassignment, or retention.
• Requesting or obtaining a consumer report for employment purposes.
• Requiring employees or applicants to answer questions about their creditworthiness, credit standing, or credit capacity.
• Asking employees or applicants to waive their rights under the law.

While this bill uses the term consumer report, the definition of a consumer report under the law is limited to information bearing on a consumer’s creditworthiness, credit standing, or credit capacity. This new law would not prohibit employers from obtaining other information from consumer reporting agencies.

The amendment is awaiting Governor Maura Healey's signature. If passed, it will go into effect on January 1, 2025. See the full text of the bill here.

When would credit checks still be allowed?

Despite some broad restrictions that apply to most employers hiring in Massachusetts, the law would still provide a few exceptions to the law for specific roles:

• Legal Requirements: Employers required by federal or state law (e.g., banks, credit unions) or self-regulatory organizations (e.g., registered securities exchanges) to use consumer reports.
• National Security: Positions requiring a national security clearance.

Anti-retaliation and anti-discrimination protections

The legislation also includes protections against retaliation and discrimination, which are important for employers to take note of. Employers cannot take adverse actions against applicants or employees for:

• Filing a complaint alleging a violation of the Consumer Protection law.
• Alleging violations of the new law.
• Participating in or assisting with investigations or proceedings related to the law.
• Opposing any general practices that violate the law.

The bigger picture

This proposed law is part of a nationwide movement toward fair and equitable hiring practices, specifically to protect individuals from discrimination based on their credit history. As employment law evolves rapidly, staying current on regulations and forms for employment ensures compliance and promotes fair hiring practices.

The new ban on using credit checks for employment purposes is one of many, and it could signal more future legislation in other states. It may also affect employers hiring remote employees in Massachusetts. Employers need to remain aware of these changes as Chapter 93A develops and to periodically consult their legal counsel to avoid the repercussions of unintentionally violating updated employment protections. To track updates on the progress of this law, take a closer look here.