Paper shredders, which have been a staple of offices for years, may become commonplace in the home as the result of new rules in the Fair and Accurate Credit Transaction Act, which originally passed Congress in 2003.

The new rules, which went into effect June 1, 2005, have a provision indicating that if a person employs just one person, such as a housekeeper, nanny or yardman, and pays their Social Security taxes as required by federal law, the information must be “destroyed” before the employer discards it.

The law requires "shredding or burning" all paper or "smashing or wiping" all computer disks that contain personal information that is "derived from a consumer report" before it is discarded. If, for example, a credit check on a household employee is done, and the information obtained from a service may have come originally from a credit report, the credit chek falls under the rules. The disposal provision affects all employers, no matter if they have one employee or thousands.

The rationale behind the law is the fear of identity theft, which is the fastest-growing crime in the U.S., according to the National Crime Prevention Council. Almost 10 million people had their identities stolen in 2010 alone.

Failure to shred can result in penalties. An employee could be entitled to recover damages sustained if his or her identify is stolen as a result of inaction. If large numbers of employees are affected, they may be able to bring class-action suits and get punitive damages from employers. The federal government could fine you up to $2,500 for each violation, and state fines could be $1,000 per violation.

Note: This information was prepared as a public service by the Illinois State Bar Association and is a joint project with the Illinois Press Association. Its purpose is to inform citizens of their legal rights and obligations.