New York City Law Restricts Use of Credit Checks for Employment Purposes


By: Behnam Salehi

On May 6, 2015, New York City Mayor Bill de Blasio signed into law a bill restricting employers’ use of credit background checks for employment purposes. The law amends the New York City Human Rights Law (“NYCHRL”) making it an unlawful discriminatory practice, with certain exceptions, for an employer to request or use the consumer credit history of an applicant or employee for any employment purpose. The law will not be limited to an employer’s hiring or termination decisions, but also makes it unlawful to use the consumer credit history in making any other decisions related to the terms and conditions or privileges of employment.

“Consumer credit history” is defined as an individual’s credit worthiness, credit standing, credit capacity or payment history obtained from (1) a consumer credit report; (2) a credit score; or (3) information provided directly by an applicant or employee (including information related to missed or late payments or collection items, bankruptcies, liens, or judgments).

Exceptions

The law does not prevent an employer from using consumer credit history for employment decisions in circumstances where the information is required by state or federal law, or by a “self-regulatory organization” as defined by the Securities Exchange Act of 1934. Additionally, employers will be permitted to request and use the consumer credit history of an applicant or employee for the following positions:

  • positions requiring security clearance under federal or state law;
  • law enforcement personnel;
  • positions requiring background checks by the Department of Investigation;
  • positions requiring use of an individual’s consumer credit history under state or  federal law;
  • non-clerical positions with “regular access” to trade secrets, intelligence information, or national security information;
  • positions having signatory authority over third-party funds or assets valued at $10,000 or more;
  • positions involving “a fiduciary responsibility to the employer with the authority to enter financial agreements valued at $10,000 or more on behalf of the employer”;
  • positions requiring to be bonded under city, state or federal law;
  • positions involving “regular duties that allow the employee to modify digital security systems established to prevent the unauthorized use of the employer’s or client’s networks or databases.”

Coverage and Penalties

Since the law simply amends the NYCHRL, it does not create any separate coverage or penalty provisions and therefore is governed by existing NYCHRL provisions. The NYCHRL extends to employers with four or more employees. Under the NYCHRL, a successful aggrieved applicant or employee may recover remedies including back-pay, compensatory damages, punitive damages, attorneys’ fees and costs, reinstatement and other equitable relief.

Guidance for Employers

In advance of the law’s effective date of September 3, 2015, New York City employers that use credit background checks should review and accordingly revise their policies to ensure compliance with the new amendment. Also, employers that use third-party companies to perform applicant or employee credit background checks should ensure their compliance with the law as well. Even under the limited exceptions described above, employers that continue to rely on credit background checks for employment purposes must comply with notice and disclosure requirements under the Fair Credit Reporting Act.

 



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