- New York City employers face new restrictions on seeking information about prospective employees through job applications, interviews, independent research or background checks. This is due to two new laws known as the Fair Chance Act – also called the "Ban the Box Law" – and the Stop Credit Discrimination in Employment Act (SCDEA).
- Under the Fair Chance Act, employers may inquire into an applicant's criminal history only after a conditional offer of employment has been extended.
- Employers may not seek credit reports for job applicants or employees except in extremely limited circumstances. The SCDEA forbids nearly all employers from asking job seekers or current employees about their credit histories or from discriminating on the basis of a worker's credit history.
Employers in New York City (NYC) now face restrictions on the types of information they can seek about prospective employees, either through job applications, interviews, independent research or background checks. This is due to two new laws known as the Fair Chance Act – or "Ban the Box Law" – that becomes effective Oct. 27, 2015, and the Stop Credit Discrimination in Employment Act, which took effect on Sept. 3, 2015.
City to Enact "Ban the Box Law"
Following a recent trend set by many other states and municipalities, NYC has passed the Fair Chance Act, a local law severely restricting how and when employers may inquire about applicants' criminal histories. The law prohibits employers with at least four employees from making an inquiry about an applicant's pending arrest or criminal conviction record until after a conditional offer of employment has been extended. The most noteworthy exception applies to employers who are otherwise obligated under federal, state or local law to conduct employee criminal background checks – they should continue to do so under the NYC law.
Although employers may inquire into an applicant's criminal history after making a job offer, the new process will be onerous on employers. Specifically, post-offer inquiries require NYC employers to comply with their analysis and notice obligations pursuant to the NYC Human Rights Law, the New York State Corrections Law and the Fair Credit Reporting Act (FCRA), all of which have balancing factors regarding the use of criminal histories in employment decisions. Notably, employers may not inquire into an applicant's criminal history in any manner pre-offer. This includes researching public information about the applicant's criminal history.
Further, the Ban the Box Law requires that employers provide applicants with a written copy of their analysis and decision, in a specified format, and set forth a written explanation of the employer's adverse employment action. Employers subject to the law must hold the position open and give the affected applicant three business days to respond to the employer's adverse employment action.
Prohibition on Employee Credit Checks
Under the new Stop Credit Discrimination in Employment Act (SCDEA), which amends the New York City Human Rights Law (NYCHRL), nearly all employers are forbidden from asking job seekers or current employees about their credit histories or from discriminating on the basis of a worker's credit history. This includes requesting consent to run a credit check on a job applicant or current employee.
The SCDEA will not affect an employer's ability to conduct background checks that do not include credit history, as otherwise permitted under the FCRA and state law.
This new law is particularly broad because it allows for credit checks under only eight exceptions, which it defines more narrowly than do other jurisdictions. Most notably, the potential placement of an employee in a position of trust or access to financial information is not alone a justification for obtaining credit information. Exceptions for financial access will be made only for those who are required to register with the Financial Industry Regulatory Authority (FINRA) or for executive-level positions with financial control over a company.
Employers who seek credit information on the basis of a claimed exemption are required to inform the applicant or employee of the exemption claimed and keep an "exemption log" of the information obtained.
Violations of the SCDEA may expose employers to civil penalties imposed by the New York City Commission on Human Rights of up to $250,000 and liability in individual actions that may garner back pay, front pay, compensatory and punitive damages.
Action Items For Employers
Employers should immediately review their job application materials and other employment forms to ensure that they excise any questions or consent forms for background checks that would be unlawful under the new city laws.