The Los Angeles Times recently reported on a new bill headed to Governor Schwarzenegger for possible signature (though I believe it is likely to be vetoed) generally prohibiting California employers from requiring applicants to allow them to examine their credit report as part of the application process.

The new California employment law would allow employers to do checks on employees who handle large amounts of money or other sensitive positions.  While I recognize that in these situations there may be some correlation between a history of poor financial choices and the ability to do certain jobs, in today’s economy the usefulness of this information is, in my opinion, declining at the same time employers’ use of it as a hiring tool seems to be increasing.

I talk to potential clients every day with tragic stories of loss about being unemployed for months while desperately searching for new employment.  Many of these people are about to lose their homes, have had their automobiles repossessed and even have experienced the demoralizing reality of sending their children off to college this fall without being able to give them any assistance with their tuition or living expenses.

When I hear from these people that their recent poor credit history, which itself is usually a direct result of either unemployment or serious illness, is now the reason they cannot find a job, it makes me angry.  The problem is that many of these employers now receive dozens, if not hundreds of applications for a handful of positions, so the applicant never gets a chance to explain their situation before they are eliminated early in the process based solely on their credit report.

Studies have shown in the past that the average employee’s credit scores has no correlation with their job performance, but as a matter of public policy I think that when unemployment is in the double-digits throughout much of California this is an issue that needs to be dealt with sooner rather than later.

Q: I quit my last job because my boss would not stop asking me out on dates. Now I am having a really tough time finding a new position. Every time I go through an interview they seem to love me, but then it falls through once they start checking my references. I think my former boss is bad-mouthing me when these employers call, even though there is nothing negative in my work history. What can I do about this?

--Can't Find a Job (CA)

A: Most employers these days are aware of the potential liability they face for saying too much about former employees. Almost all larger companies will simply say how long the former employee worked for them, their position and rate of pay. In response to any detailed questions, they simply say it is their "policy" not to reveal anything more.

One big problem is when potential employers call supervisors or co-workers for references instead of the human resources department. Most companies have strict prohibitions on who is allowed to give out references, but this is not always the case.

The Law in California

Many Californians believe that it is illegal for employers to say anything negative about them after they leave. However, this is just not the case. It is completely legal for an employer to say anything they want about a former employee as long as it is true.

This might seem like an easy test, but when you consider some of the things that employers say, such as "she wasn't a very hard worker" or "she is lazy," whether or not something is "true" becomes hard to judge.

This is why many companies just prohibit any comments about former employees' performance altogether. California employees who sue because former employers misrepresented something to potential employers can recover triple damages.

Possible Solutions

The problem you have is you do not know if your employer is truly saying negative things about you, what they are saying, or who is saying it. These are all facts you need to know before you decide what to do.

One easy way to find out this information is to have a friend or relative call your old employer and pretend to be a potential new employer. Your friend can ask whether they recommend you, whether you are eligible for rehire, if there is anything they should know about you, etc.

Another method is to use a reference-checking service. These services employ court reporters who call former employers posing as a potential new employer and type out every word that is said. After the call is concluded, they sign an affidavit testifying to the transcript's authenticity and send you a full report.

If you strongly suspect that your former employer is bad-mouthing you, this might be the way to go because the affidavit can be used to sue your former boss or the company for defamation or misrepresentation.

The best reference check service I have used is Documented Reference Check (DRC), which you can visit at www.BadReferences.com. There is a fee for their services, but it is always good to know whether a former employer is bad-mouthing you behind your back.