While Hawai'i workers accept pay cuts and suffer job losses, state lawmakers are trying to restrict employers from reviewing a person's credit history when hiring or firing an employee.

As unemployment rises while the economy stumbles toward recovery, a bill born in the state House would establish an employer's use of an individual's credit history in hiring and termination decisions as an unlawful, discriminatory practice.

The bill will be heard by the Senate Labor Committee on Thursday.

Labor unions support the measure, saying that using credit history to evaluate an employee or job candidate's ability to do the work amounts to "economic segregation."

Given the state of the economy, deciding who to hire or fire based on credit history is unethical, said the bill's author, state Rep. Marcus Oshiro, D-39th (Wahiawa), chairman of the House Finance Committee.

Supporters of the bill say many people have unfavorable credit reports because they lost their jobs in this down economy, while others have had their identities stolen and are trying to undo the damage.

"It would be terrible for anyone to lose employment or not get hired because of these reports," Oshiro said. "By denying anyone employment (based on their credit report) you are confining them to modern-day debtors prison."

About one-third of people earning less than $45,000 had bad credit before the current economic downturn, according to a Freddie Mac study.

And more than 37 percent of respondents to a 2007 survey published by Smart Money Magazine claimed that their credit reports contained inaccuracies.

"Credit checks in hiring represent a form of economic segregation, in which job seekers are behind on their bills because they lost a job or their hours were cut ... (leaving them) unable to get a job or promotion," said Hernando R. Tan, president of Local 5, in testimony submitted to the state Senate Labor Committee.

The Local 5 union said the bill is long overdue, claiming that no evidence exists that ties credit history to job performance.

Fred Galdones, president of the International Longshore and Warehouse Union, Local 142, said, "An employee's credit history should be confidential from his employer. The employer is not loaning him money to buy a house or a car. The employer should only be concerned that the employee is able to perform his or her job satisfactorily."

The Hawai'i chapter of the Society for Human Resource Management submitted testimony opposing the bill.

"We would like to see provisions made to this bill which would allow the use of credit report information in connection with legitimate job-related consideration," said Shawn Carbrey, government and legislative affairs director for the chapter.

The Consumer Data Industry Association, a trade association that represents more than 200 consumer data companies, opposes the bill. It said theft by employees accounts for more than $15 billion a year in business losses, and that the average employee embezzlement case involves more than $125,000.

"We understand that there may be a concern regarding an employer's potential misuse of credit reports," Eric J. Ellman, the Consumer Data Industry Association's vice president for public policy and legal affairs, said in testimony submitted to the committee. "However, H.B. 31 may have the unintended consequence of discouraging employers from using a key tool that they might use to screen for possible fraud or other financial crimes."