Under the proposed Social Networking Online Protection Act (SNOPA), employers who demand Facebook passwords could be fined $10,000, according to the Telegraph.
Schools and universities would also be banned from demanding passwords as part of disciplinary or enrollment processes.
The move comes after several highly publicized cases in which employers asked job candidates for passwords during the recruitment process and concerns raised by Facebook itself.
Facebook has pledged to take action to protect the privacy and security of its users by engaging with policymakers and taking legal action where necessary.
Introducing the bill, Congressman Eliot Engel (D-N.Y.) said private social networking content and passwords should have the same protection as e-mail account passwords or banking information.
"These coercive practices are unacceptable, and should be halted," Engel said.
As well as password demands, the bill would also ban other means of accessing a private account, which would cover demands for "friend" status.
According to legal experts, there is nothing to stop UK employers asking for access to social networking accounts.
The Telegraph quoted Paula Whelan, an employment partner at law firm Shakespeares, as saying it would be very difficult to prove discrimination if a candidate thought they did not get a job because they refused to hand over their login details.
This story was first published by Computer Weekly