Yesterday, Mayor Bill de Blasio signed a bill making it unlawful for New York City employers to use an employee’s or applicant’s credit history for employment purposes.  The law, which amends the New York City Human Rights Law (NYCHRL), makes it an unlawful discriminatory practice for an employer to use or request an employee’s or applicant’s consumer credit history, except in certain enumerated circumstances.  The law will go into effect on September 3, 2015.

Under the new law, known as the Stop Credit Discrimination in Employment Act, employers in New York City are prohibited from basing any hiring, compensation or other employment decisions regarding the terms or conditions of employment on an individual’s “consumer credit history,” which is defined as an individual’s “credit worthiness, credit standing, credit capacity or payment history” as indicated by the individual’s consumer credit report, credit score or information obtained directly from the individual regarding credit accounts or bankruptcies, judgments or liens. 

Under federal law, it is not illegal for an employer to ask about an applicant’s credit background, or to require a credit check, so long as the employer complies with the Fair Credit Reporting Act (FCRA).  In enacting this law, however, New York City joins the growing list of jurisdictions enacting legislation limiting an employer’s ability to make employment decisions based on an employee’s or applicant’s credit history. 

The new law provides a list of limited carveouts that allow certain employers to request or consider an individual’s credit history for employment purposes.  Specifically, the law does not apply to employers who are required by state or federal law, or by a self-regulatory organization (as defined in the Securities Exchange Act of 1934), such as FINRA, to use an individual’s consumer credit history for employment decisions, nor does the law preclude employers from requesting or receiving consumer credit history pursuant to a court order, lawful subpoena or law enforcement investigation. 

Additionally, the law does not apply to persons seeking or having the following positions:

  • Non-clerical roles with regular access to trade secrets (which does not include client, customer or mailing lists), intelligence information or national security information (as such terms are defined in the legislation)
  • Jobs entailing signatory authority over third-party funds or assets valued at $10,000 or more, or that involve a “fiduciary responsibility to the employer” with authority to enter into financial agreements valued at $10,000 or more on behalf of the employer
  • Jobs in which the regular duties involve “modify[ing] digital security systems established to prevent the unauthorized use of the employer’s or client’s networks or databases”
  • Police officers or peace officers
  • Public officials in positions involving a “high degree of public trust”
  • Those for which the employee must be bonded under federal, state or local law and
  • Those for which federal or state law requires that the employee have security clearance.

Given that the law amends the NYCHRL, it applies to New York City employers of four or more employees.  Likewise, as part of the NYCHRL, aggrieved individuals have a private right of action to recover back pay, front pay, emotional distress damages, attorneys’ fees and punitive damages. 

In the wake of this new legislation, New York City employers who use credit information for employment purposes − including hiring, retention, reassignment and promotion − should evaluate if the law prohibits them from continuing to do so and should review their existing policies and procedures to ensure compliance.  This law also serves as a reminder for employers to evaluate whether they are adequately complying with notice and consent requirements in FCRA.