NYC Ban on Use of Credit Checks in Employment Decisions Moves to Mayor’s Office for Signature

On April 16, 2015, the New York City Council voted overwhelmingly to amend the city’s Human Rights Law to prohibit employers from using an individual’s consumer credit history to make employment decisions. While the bill contains certain exceptions for positions requiring heightened levels of security, the proposed law will affect most employers who have employees working in New York City. The bill will become effective 120 days after Mayor de Blasio signs the bill into law, which it is assumed he will do. Employers should review their personnel policies for compliance with what is anticipated to become part of the New York City Human Rights Law (the “NYCHRL”) at some point in August 2015 or shortly thereafter.

While the NYCHRL exempts “any employer with fewer than four persons in his or her employ” from some of its provisions, this exemption does not apply to this new provision according to the final form of the bill. Individuals who work with any degree of regularity in the city—even on a part-time basis—are likely entitled to the bill’s protection, especially in light of the NYCHRL’s broad remedial purpose. In addition, the New York State Court of Appeals has extended the protections of the NYCHRL to employees who work in the city, regardless of where the employer’s offices may be located (although attendance at quarterly meetings held within the borders of the city was determined to be insufficient to maintain a claim under the NYCHRL). Accordingly, it is likely that this proposed amendment will apply, for example, to freelancers working out of third-party workspaces in the city for out-of-state businesses.

The bill exempts from its coverage employers required to conduct such inquiries by state or federal law or statute, or by the rules of a financial self-regulatory organization (such as the SEC or FINRA). The bill also exempts from its coverage applicants for or employees in certain sensitive positions, including:

• Police officers;
• Positions in which employees are required to maintain security clearance under federal or state law;
• Positions with signatory authority over or fiduciary duty for at least $10,000 in employer, client or customer funds; and
• Non-clerical positions with regular access to trade secrets, intelligence information or national security information.

The bill does not set a timetable for any rule-making on the part of the Commission on Human Rights to provide further guidance on these exemptions.

Definition of “Consumer Credit History”

In addition to credit scores and reports from consumer credit agencies, the bill includes in the definition of “consumer credit history” information that an individual may disclose about his or her own financial background.

What Is an Employment Decision?

Assuming this new provision is read coextensively with the other provisions of the NYCHRL, the bill would ban any employment action by which an individual is treated less favorably than similarly situated individuals because of his or her credit history.

Remedies

An aggrieved individual may file a complaint of discrimination with the New York City Commission on Human Rights (within a one-year limitations period) or file an action directly in court (within a three-year limitations period).

Practical Advice

Employers with employees who work in New York City should conduct an internal audit to evaluate the changes to their hiring and retention practices that this bill may occasion. At the very least, written application forms should be revised to make clear that the credit history of an applicant seeking employment within New York City will not be considered in evaluating the applicant’s qualifications. Hiring managers should be trained not to make such inquiries during the interview process, as well as how to respond to an applicant’s voluntary self-disclosure of his or her financial condition.

Related Applicable Laws

The federal Fair Credit Reporting Act (FCRA) already imposes certain procedural requirements upon employers that conduct a background investigation on applicants or employees. For example, employers must obtain advance written consent before conducting such a background investigation. What’s more, Section 23-A of the New York State Corrections Law imposes additional requirements upon an employer in the event that it considers an applicant’s criminal conviction history in its evaluation of the applicant’s qualifications. The bill approved by the City Council adds an additional layer of restrictions making it an “unlawful discriminatory practice” to consider an individual’s credit history in making employment decisions (subject to the limited exceptions summarized above).

Comparison to Other Jurisdictions

Assuming Mayor de Blasio signs the bill, New York City will join ten states that have passed similar laws. The $10,000 signing authority threshold is higher than many similar statutes (for instance, in Connecticut and Maryland, an employer may run a credit check on any employee to whom it issues a corporate debit or credit card, regardless of the maximum line of credit on such a card). Additionally, in contrast to laws in other jurisdictions (including Oregon and Washington), the New York City bill does not contain a provision which would allow an employer to look into an individual’s credit history if it discloses to the applicant or employee that that the information is substantially related to a specific position.