New NYC Law Bans Use of Credit Histories in Employment Decisions

By Eleanor J. Lipsky, Esq.
elipsky@pashmanstein.com

Last month, New York City’s Mayor Bill de Blasio signed into legislation Intro. 261-A, or the Stop Credit Discrimination in Employment Act, which amends the New York City Human Rights Law.  The Act makes it unlawful for New York City employers to use an individual’s consumer credit history in making hiring and employment decisions.  The law goes into effect on September 3, 2015.

Proponents of the law argue that reliance on credit checks discriminates against minorities and low-income job applicants with poor credit histories and limits their ability to improve their credit status.  The New York City Council found that employers often use consumer credit information to make hiring decisions, despite the fact that there is little evidence linking an employee’s credit score or credit worthiness to job performance.  Credit checks may adversely affect those who have fallen behind on student loan payments or medical bills and can also have a disparate impact on women and victims of domestic violence, for instance.

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…”.   The law makes it unlawful to both use an applicant’s credit history and to request a credit history for employment purposes, unless one of the exceptions to the law is met, as discussed below.

Note that New York City’s law is considered broader than most other jurisdictions that have adapted similar measures.   Other jurisdictions often provide exceptions for managerial positions, financial institutions, or positions were a credit report is substantially related to the position.   However, New York City’s law contains only a few limited exceptions that allow for the use of credit checks when necessary.  The exceptions include positions that require an employee to be bonded by the City, state or federal law; positions requiring security clearance under federal or state law; non-clerical positions with regular access to trade secrets; and positions allowing modification of digital security systems that protect employer or client networks or databases, among several others. [1]  Also note that the term “trade secrets” here does not include access to general proprietary company information and “regular access to trade secrets” does not mean access to client or customer lists.

This law applies to New York City employers of four or more individuals and is enforceable through the City Commission on Human Rights or by a civil action.  It is recommended that New York City employers therefore reassess their employment practices with respect to use of credit histories and ensure that the positions included in the carved-out exceptions to the law are distinguished from all other positions.

[1] See http://legistar.council.nyc.gov/LegislationDetail.aspx?ID=1709692&GUID=61CC4810-E9ED-4F16-A765-FD1D190CEE6C for the legislation’s full text.

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