The large and troubled state of California always seems to lead the nation, if not the world, in coming up with cutting-edge workforce trends.

Some of these trends are good, some bad, some silly and foolish, but no matter how you view them, there’s no doubt that a lot of what happens in California doesn’t stay in California. In time, it can affect you and your workforce no matter where you work and live.

Here’s yet another example, courtesy of the Los Angeles Times: “Employers increasingly are using credit checks to screen job applicants, a practice critics say is making it tougher for many unemployed workers to find jobs in the midst of a grinding recession. That could change by the end of this week, when a bill that would prohibit companies from pulling credit reports on most job seekers is scheduled to reach Gov. Arnold Schwarzenegger’s desk.”

The Times story focuses on a bill in state Assembly that would “narrow the category of jobs for which employers could investigate the financial background of applicants. Those would include positions in which employees would have access to large amounts of cash, valuables or confidential financial information, as well as managerial and law enforcement posts.”

Credit checks aren’t new; I had to agree to be checked and “bonded” when I took a job at Sears many years ago during my college days. I was going to be dealing with money and the company wanted to make sure I didn’t have something in my past that would make me a less-than-stellar risk. At the time, I don’t recall thinking it was a big deal.

It’s probably not a big deal for many now either, but it has become a big industry. As we noted in our Workforce Management Special Report on Background Checking in February, “If employers had screened out applicants based on credit history hits in 2007, they would have eliminated more than 40 percent of all applicants; if they had rejected those with criminal hits, they would have eliminated nearly 10 percent, according to the latest background screening hit report by Kroll.”

But we also said that pre-employment background checks aren’t perfect. “More than half of the organizations victimized by fraud ran an employment-history check on the perpetrator,” contributing editor Fay Hansen reported. “[Some] 40 percent ran a criminal background check and 23 percent ran a credit check. In half of the cases in which the perpetrator had convictions for fraud or had been terminated by an employer for fraud-related conduct, the victim organization had screened the perpetrator’s employment history as part of the hiring process.”

The Times story says companies feel that credit checks are a way to “help verify that candidates are responsible and trustworthy. The California Chamber of Commerce supports credit checks as a way to flag hires with checkered backgrounds that wouldn’t show up in resumes or interviews.” It lists the credit check bill on a list of potential “job killers”—legislation that would hurt California’s economic growth.

The flip side of this, the newspaper points out, is that “some academic studies have found little connection between credit history and job performance. Critics contend that the practice perpetuates a vicious cycle in a rough job market: Candidates with dinged credit have a tougher time landing work that would help them out of their financial bind. Civil rights organizations say the practice is particularly disadvantageous to minorities and women.”

Plus, the Times talks to a woman who had five job offers retracted in the past six years because of her credit report. It was bad, she says, “because of visits she made to the emergency room without medical insurance, including one episode of chest pains that ended up costing her $26,000.”

My problem with all of this is that credit reports are simply one tool in the hiring and screening toolbox.

No credit check should determine who you hire. Any company that blindly uses a pre-employment background screening without looking at any other factors is probably missing the boat on a lot of good job candidates, or, hiring some of those people who end up committing fraud on the job. Both speak to a singular lack of common sense in hiring, and no credit or pre-employment check is going to help with that.

A year ago Schwarzenegger vetoed a bill similar to the current one in the Assembly, and there’s no reason why he won’t do it again. So maybe this won’t be one of those new workforce trends coming out of California, but I wouldn’t bet on it.

My guess is that this issue isn’t going away. It will re-emerge, as so many of these bills do, in some way, shape or form. And maybe the next time it does, there will be a new California governor in place who has a different perspective on the matter.

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