California: Making Hiring More Risky Will Reduce Unemployment

We thought we'd given a decent run-down of the Legislature's swings and misses in their most recent session, but in the thick fog of economic ignorance hanging over Sacramento, it looks like we missed a few notable bills. One of the new laws put into effect by Governor Brown last weekend, we're sad to say, is AB 22.

With the unemployment rate holding steady at around 12%, California clearly needs to get serious about improving its economic climate. Unfortunately, all signs suggest that Sacramento has no intention of loosening its strangehold on the state's private sector. And AB 22 only demonstrates the extent to which California is moving in the wrong direction. The bill, as we discussed back in August, prohibits private businesses from conducting credit and background checks on prospective hires (managerial positions, and jobs in banking and finance, are exempted). As with most of the economic regulations the Legislature puts forward, the bill is likely to make hiring more, not less, risky. Firms will become leery of promoting newer hires into managerial roles, and could be exposed to lawsuits by applicants who challenge the classification of open posts as managerial. Moreover, it's naive to assume that only managers are offered chances to defraud a business; according to a survey of retailers nationwide, 40% of losses were the result of employee theft. In other words, hiring could slow down even more after this law goes into effect.