New York City Bans Most Employers from Considering Credit History for Employment Decisions
Service : Background Screening
Acting under a belief that employers’ consideration of credit history disproportionately affects minority and low-income applicants, New York City has joined a number of other jurisdictions in prohibiting employers from using credit history information in employment decisions. Mayor Bill DeBlasio signed the bill into law on May 6, 2015, and it will become effective 120 days after enactment.
Specifically, Int. No. 261-A amends the New York City Human Rights Law (“NYCHRL”) to make it an “unlawful discriminatory practice for an employer, labor organization, employment agency, or agent thereof to request or to use for employment purposes the consumer credit history of an applicant for employment or employee, or otherwise discriminate against an applicant or employee with regard to hiring, compensation, or the terms, conditions or privileges of employment based on the consumer credit history of the applicant or employee.”1
The law defines “consumer credit history” as “an individual’s credit worthiness, credit standing, credit capacity or payment history, as indicated by: (a) a consumer credit report; (b) credit score; or (c) information an employer obtains directly from the individual regarding (1) details about credit accounts, including the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, prior credit report inquiries, or (2) bankruptcies, judgments or liens. The law defines a “consumer credit report” to include “any written or other communication of any information by a consumer reporting agency that bears on a consumer’s creditworthiness, credit standing, credit capacity or credit history.”2
The law does provide an exemption from the prohibition on using credit history information in employment decisions where such information is required by state or federal law or regulations, or by a self-regulatory organization (as defined by the Securities Exchange Act of 1934). In most sectors of the financial services industry, specific state and/or federal laws and regulations require employers to investigate or attest to a potential employee’s financial stability based on an investigation of the individual’s financial background. Thus, employers operating in these regulated industries are exempt from the prohibition and can continue to check credit histories in accordance with their legal obligations. In some cases, it may not be an explicit requirement that employers obtain credit reports on prospective employees, but the duty is implied through a requirement that the applicant disclose—and that the employer verify—the applicant’s financial history including bankruptcies, judgments and liens.
In addition, the law identifies several other employment positions that are exempt from the credit check prohibition, including:
- certain public safety positions (e.g. police officers, peace officers, Department of Investigation personnel and other individuals subject to a background investigation by theDepartment of Investigation);
- positions requiring bonding under federal, state or city law (e.g., certain positions in finance);
- positions requiring security clearance under any federal or state law;
- non-clerical positions with regular access to trade secrets or national security/intelligence information;
- positions with (i) signatory authority over third party funds or assets valued at $10,000 or more, or (ii) authority to enter into financial agreements valued at $10,000 or more on behalf of the employer; and
- positions with regular duties allowing an employee to modify digital security systems designed to prevent the unauthorized use of the employer’s or client’s networks or databases.
Because the law becomes a part of the NYCHRL, the New York City Commission on Human Rights (“NYCCHR”) will be responsible for enforcing the new law.
An employee asserting a claim for discriminatory treatment based on the unlawful use of his or her credit information can either file a complaint with the NYCCHR or bring an action directly in state court. Successful plaintiffs may be able to recover back pay, damages (including compensatory and punitive), attorneys’ fees and other equitable relief such as reinstatement.
Both federal and New York state law continue to allow employers to use credit reports in employment decisions as long as the procedures outlined in the Fair Credit Reporting Act are followed. Employers operating in New York City would be well-advised to review their employment screening policies to determine whether this change will impact their existing procedures and to otherwise ensure compliance with this new law.
1 N.Y.C. Council Bill Number 261-A § 2.
2 Id. at § 1.
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