New York City Commission of Human Rights Provides Insight on How “New York City Stop Credit Discrimination in Employment Act” will be Enforced

Paula Lopez, October 23, 2015.

As noted in a previously posted blog dated May 12, 2015, New York City passed the New York City Stop Credit Discrimination in Employment Act (“SCDEA”), which amends the New York City Human Rights Law to include provisions prohibiting employers, labor organizations and employment agencies from conducting credit checks as part of their hiring process and from discriminating against an applicant or employee based on credit history, with certain limited exceptions.  SCDEA went into effect on September 3, 2015.  The New York City Commission on Human Rights (“Commission”), the city agency charged with enforcing SCDEA, has issued Enforcement Guidance (“Guidance”) intended to provide employers covered by the law with the Commission’s interpretation of SCDEA’s essential provisions and insight as to what steps employers can take to ensure compliance with the law.

At the outset, the Guidance makes it clear that in passing SCDEA, the City intended for it to be the strictest law of its kind and for the Commission to narrowly construe the enumerated exemptions allowed under the law. The Guidance emphasizes that the exemptions do not apply industry-wide or to an entire employer but are limited to particular positions or roles.  Further, an employer can be liable for violating the SCDEA regardless of whether an adverse employment action occurred as a result of considering an individual’s credit history.  It is a violation to (1) request consumer credit history from job applicants, or potential or current employees, (2) request or obtain credit history of a job applicant or potential or current employee from s consumer reporting agency, or (3) use consumer credit history in an employment decision or when considering an employment action. Whether an adverse employment action was taken—when a violation of SCDEA has been found—can be considered in determining the amount of damages or penalties to be assessed against an employer in violation of the law.

According to the Guidance, the range in the amount of civil penalties that can be imposed against an employer found liable in an administrative action brought under SCDEA could be as high as $125,000 for non-willful violations and $250,000 for violations that are found to be a result of willful, wanton or malicious conduct.  These civil penalties are in addition to other remedies available under the NYCHRL such as back and front pay, and compensatory and punitive damages.  According to the Guidance, some of the factors the Commission will consider in determining the amount of civil penalties to be imposed include: the severity of the violation, existence of other violations, employer’s size (number of employees and revenue), and the employer’s actual or constructive knowledge of SCDEA.

Given the Commission’s intent to strictly enforce SCDEA and the significant fines employers found in violation of the act are exposed to, employers should diligently follow the requirements of the SCDEA.  With regards to when an employer can lawfully assert one of the enumerated exemptions and request and/or consider an applicant’s or employee’s credit history prior to making an employment decision, the Guidance provides some clarification as to which positions/roles were intended to be covered by the exemptions.

For each exemption under the SCDEA, the Commission’s Guidance provides the following clarification:

1.      Employers required under federal, state or local law to consider an individual’s consumer credit history for employment purposes (i.e. Financial Industry Regulatory Authority (“FINRA”).

Guidance: Exemption applies to FINRA members required to register with FINRA and not to employment decisions related to FINRA employees not subject to FINRA’s registration requirements (e.g., individuals performing functions that are “supportive of, or ancillary, or advisory to, ‘covered functions’ or engage solely in clerical or ministerial activities.”)

2.      When hiring and employing individuals as police offices, peace officers, or positions with a law enforcement or investigative function at the Department of Investigations (“DOI”).

Guidance: The exemptions under SCDEA are limited to police officers and peace officers as defined under NY Criminal Procedure Law §§ 1.20 (34) and 2.10, respectively, and only to DOI personnel having investigative functions.  The Guidance recognizes that there are many DOI positions without investigative functions. The exemption does not apply to employment decisions relating to clerical or civilian positions not having DOI investigative functions or falling outside the definition of police officer and peace officer.

3.      Positions subject to a DOI background investigation.

Guidance: Exemption only permits city agencies to request or consider consumer credit history collected by the DOI when making employment decisions related to appointed positions and positions requiring a “high degree of public trust”.  The Guidance considers the following positions as “involving a high degree of public trust”:

• Commissioner titles (including Assistant, Associate and Deputy Commissioners);
• Counsel titles (including General Counsel, Special Counsel, Deputy General Counsel, and Assistant General Counsel);
• Chief Information Officer and Chief Technology Officer titles; and
• Any position reporting directly to an agency head.

4.      Positions having bonding requirements under federal, state or city law or regulation.

Guidance: For the exemption to apply, bonding must be required not just permitted under City, state and/or federal law. (e.g., pawnbrokers, auctioneers, bonded carriers for U.S. customs, and ticket sellers & resellers.)

5.      Positions requiring security clearance under federal or state law.

Guidance: Applies only when the federal or state government will be reviewing consumer credit history as part of evaluating a person for security clearance, and such clearance is legally required for the person to fulfill his or her job duties.  “Security clearance” means ability to access classified information.

6.      Non-clerical positions having access to trade secrets, intelligence information or national security information.

Guidance: clarifies the definitions of “trade secrets”, “intelligence information”, or “national security information” contained in the SCDEA. The Commission interprets the definition of “trade secrets” to exclude a company’s general proprietary information such as handbooks or policies, and information regularly collected in the course of business or regularly used by entry-level, non-salaried employees and their supervisors or managers, such as recipes, formulas, customer lists, mailing lists, and processes.   With regard to exempted positions having access to “intelligence information”, the Commission will limit the exemption to cover only “those law enforcement roles that must routinely utilize intelligence information.” Similarly, the Commission narrowly construes the positions with access to “national security information” and limits the exemption to include “those government and government contractor roles that require high-level security clearances.”

7.      Positions having signatory authority over third-party funds or assets in excess of $10,000.

Guidance: the Commission interprets this exemption to only apply to executive-level positions with financial control over a company (e.g. CFO and COOs) and does not apply to all staff in a finance department.

8.      Positions involving digital security systems.

Guidance: Commission interprets this exemption to apply to executive level positions such as CTO or a senior information technology executive having control access to all parts of a company’s computer system.  The exemption does not apply to all staff in a company’s IT department or to all persons with access to a computer system or network available to employees.

The Commission also states in the Guidance that any employer who believes its use and/or consideration of an applicant or employee’s consumer credit information is exempted from the anti-discriminatory provisions of the SCDEA must maintain a record of its use of the exemption and be able to show that the position or role falls under one of the enumerated exemptions. According to the Guidance, an employer should inform employees or applicants of the claimed exemption and keep a record of its use for a period of five years from the date the exemption was used.  The Guidance also states that employers should maintain an exemption log to aid them in responding to requests for information from the Commission.  The exemption log should include the following information:

1. The claimed exemption;
2. Why the claimed exemption covers the exempted position;
3. The name and contact information of all applicants or employees considered for the claimed exemption;
4. The job duties of the exempted position;
5. The qualifications necessary to perform the exempted position;
6. A copy of the applicant’s or employee’s credit history that was obtained pursuant to the claimed exemption;
7. How the credit history was obtained; and
8. How the credit history led to the employment action.

While the Guidance provides crucial insight as to how the Commission will interpret the applicability of the enumerated exemptions, further clarification is needed on the applicability of some of the exemptions.  For instance, the Guidance is specific about the application of the exemption to FINRA employees but fails to mention how it applies to other self-regulatory organizations expressly covered by the law.  Similarly additional clarification is necessary with regard to individuals with authority to enter into financial agreements on behalf of the employer valued at $10,000 or more.  The Guidance only addresses the applicability of the exemption to CFOs and COOs but does not acknowledge that in many large corporations non-executive level employees may have such authority and would likely be covered by the exemption.

The SCDEA has been in effect for less than two months and the Guidance is an initial effort to assist employers in understanding the law and its applicability. The Commission will continue to provide clarification on the law through information on its website as well as the promulgation of formal rules.  In the meantime, New York City employers should take advantage of the insight provided by the Guidance as to how the Commission will be interpreting the SCDEA and review their policies for compliance with the law.