New York City employers who routinely use credit checks as part of the pre-employment process may be in for a rude awakening. Earlier today, the NYC Council passed legislation that bars most employers with four or more employees, as well as employment agencies, from requesting or using a current or prospective employee’s “consumer credit history” for employment purposes, including those related to hiring and compensation (the Bill). The Bill defines “consumer credit history” as an individual’s creditworthiness, credit standing, credit capacity, or payment history, as indicated by:

  • A consumer credit report
  • A credit score, or
  • Information an employer obtains directly from the individual regarding
    • Details about credit accounts, including the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, prior credit report inquiries, or
    • Bankruptcies, judgments or liens.

As a slight consolation to the business community, the Bill – informally dubbed the Stop Credit Discrimination in Employment Act – contains several exemptions, which were a late addition that helped push it across the finish line. Specifically, the Bill exempts:

  • Entities that are “required by state or federal law or regulations or by a self-regulatory organization as defined in section 3(a)(26) of the securities exchange act of 1934” to use an applicant’s or employee’s “consumer credit history for employment purposes”
  • Certain law enforcement personnel
  • Positions that require an individual to be bonded under federal, state, or local law
  • Positions that require an individual to possess security clearance under federal or state law
  • Non-clerical positions pursuant to which individuals will have “regular access to trade secrets, intelligence information or national security information” (the Bill goes on to provide that “[t]he term ‘trade secrets’ means information that: (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; and (c) can reasonably be said to be the end product of significant innovation. The term ‘trade secrets’ does not include general proprietary company information such as handbooks and policies. The term ‘regular access to trade secrets’ does not include access to or the use of client, customer or mailing lists”).
  • Individuals applying for positions “(i) having signatory authority over third party funds or assets valued at $10,000 or more; or (ii) that involve[] a fiduciary responsibility to the employer with the authority to enter financial agreements valued at $10,000 or more on behalf of the employer,” or
  • Individuals applying for positions “with 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.”

The Bill also directs the NYC Commission on Human Rights – the City’s fair employment practices agency – to issue a report within the next two years concerning employers’ use of the aforementioned exemptions.

With regard to enforcement, the Bill permits employees to pursue a private right of action and seek the same broad remedies as any other claims asserted under the employee-friendly NYC Human Rights Law. It will take effect 120 days after it is signed by Mayor Bill de Blasio.

Practical Considerations

For New York City employers who perform credit checks on job candidates or current employees, a review of existing policies and procedures is a must. Employers should also review job descriptions to identify which positions are exempt from the Bill. Working with experienced counsel now to align your pre-employment and other relevant practices with the Stop Credit Discrimination in Employment Act will result in fewer headaches down the road