New York City Restricts the Use of Consumer Credit History in Employment

Paula Lopez, May 12, 2015.

On May 6, 2015, Mayor Bill De Blasio signed into law Bill A-261A, which amends the New York City Human Rights Law (NYC HRL) to prohibit 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.  Although the new law provides for certain exemptions where employers are permitted to request and rely on credit-related information, the exemptions are limited.

Employers with four or more employees are covered under the law and independent contractors are counted as employees in determining the applicability of the law.  The law prohibits covered employers from requesting or using the “consumer credit history” of an applicant or employee for employment purposes or otherwise discriminating against applicants or employees with regard to hiring, compensation or the terms and conditions of employment.  The law broadly defines “consumer credit history” to include “an individual’s credit worthiness, credit standing, credit capacity or payment history” as reflected through consumer credit reports, credit scores or information obtained directly from an applicant or employee regarding their credit standing.

Employers are still permitted to request and consider credit-related information for applicants and employees in the following circumstances:

1.      When an employer is required under federal, state or local law to consider an individual’s consumer credit history for employment purposes (i.e. Financial Industry Regulatory Authority); and/or

2.      When hiring and employing individuals for the following positions:

a. Police or peace officers;

b. Position subject to background checks by the Department of Investigations,

c. Position having bonding requirements under federal, state or local law;

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

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

f. Positions having a fiduciary responsibility to the employer with authority to enter into financial agreements on behalf of the employer valued at $10,000 or more; and/or

g. Positions whose regular duties include modifying digital security systems to prevent the unauthorized use of the employer’s or clients’ networks or databases.

The law generally defines “intelligence information” as records and data compiled for the purpose of criminal investigation or counterterrorism. “National security information” includes any knowledge relating to the national defense or foreign relations of the United States, owned by, produced by or for, and is under the control of the U.S. government.  The definition of “trade secrets” triggering the exemption excludes general proprietary company information such as handbooks, policies, client, customer or mailing lists.  Instead “trade secrets” is limited to: (a) information whose economic value is derived from not being generally known or ascertainable by other people who can obtain value from its disclosure; (b) information that is subject to efforts which, under reasonable circumstances, maintain its secrecy; and (c) can reasonably be said to be the end product of significant innovation.

The enforcement of the law is governed by the enforcement provisions of the NYC HRL, which afford an aggrieved employee or applicant the right to file a complaint with the New York City Human Rights Commission or bring an action directly in court.  An employer found in violation of the law could be liable for back pay, front pay, reinstatement, compensatory and punitive damages, attorney’s fees and costs.   The law takes effect September 3, 2015.

Despite the various exemptions to the law, New York City’s law banning credit checks in employment is the most stringent, as compared to similar laws passed in other states and municipalities, such as California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, Washington, Chicago, and Madison, WI because, unlike many of the laws passed by these other states and municipalities, New York City’s law does not provide blanket exemptions for financial institutions or positions involving the handling of money, and creates a private cause of action.

Before the law goes into effect, New York City employers should reevaluate their policies to determine whether they need to modify their hiring process to exclude credit checks or to determine whether the positions they employ fall within one of the enumerated exemptions permitting the use of credit-related information for employment purposes.


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