March 5, 2003

Conducting Credit Checks

Question: We carry on business in the U.S. and have recently decided to extend our operations to Ontario . As part of our standard employment application form we have a paragraph whereby the prospective employee authorizes us to conduct background investigations into her consumer credit. Can we continue to use this application form when hiring in Ontario ?

Answer: In Ontario the Consumer Reporting Act states consumer credit and personal information can only be provided by a consumer reporting agency in response to an employer’s request if the prospective candidate has been advised of the inquiry.

Therefore if you are intending to conduct such investigative background inquiries the employment application form should include a request for authorization and notification of the search. The notice of the employer’s intention to conduct a consumer credit check on the applicant must be clearly set out in bold type or underlined and in 10-point font or larger.

But the actual requests for information to the consumer reporting agency should not be made until after the employee has been given a conditional offer of employment. By law any enquiries in terms of consumer credit checks may only be conducted after a conditional offer of employment is made.

Therefore once a conditional offer of employment has been extended to the prospective employee, a separate pre-employment inquiry release form should be signed by the applicant. The background investigation can then be conducted once the employee has signed the pre-employment inquiry release form.

It is important to note if you decide not to hire the prospective candidate because of information you receive from the credit check, the candidate must be informed of this fact. Liability of a corporation for failure to do so can result in a maximum penalty of $100,000.

Peter Israel is the senior partner in the Toronto law firm of Israel Foulon LLP – Employment and Labour Lawyers. He can be reached at 416-640-1550 or pi@israelfoulon.com. A version of this article originally appeared in the Carswell publication, Canadian Employment Law Today

LEGAL DISCLAIMER: This article is for informational purposes only and is not intended to provide legal advice, which in all circumstances must be tailored to the specific facts of any problem. You should obtain a proper legal consultation in order to determine how this article applies to your specific situation.
Please feel free to contact Israel Foulon LLP to learn more at 416-640-1550.

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