On April 16, 2015, the New York City Council passed a bill (Intro. No. 261-A, 2014) that would amend the New York City Human Rights Law to prohibit employers from requesting or using an individual's consumer credit history in making employment decisions. The prohibition applies to all employment decisions, including those with respect to hiring; compensation; and terms, conditions and privileges of employment. Unlike recent "ban-the-box" legislation, which generally restricts the consideration of an applicant's criminal history until some point after the initial application process, the bill prohibits consideration of credit history at any point, both during and after the hiring process.
"Consumer credit history" is defined in the bill to include an individual's credit worthiness, credit standing, credit capacity, or payment history, as indicated by: (1) a consumer credit report; (2) credit score; or (3) other information an employer obtains directly from the individual regarding details about credit accounts, including number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit and prior credit report inquiries; or bankruptcies, judgments or liens.
Informally known as the "Stop Credit Discrimination in Employment Act," the bill exempts from coverage the following employers and positions:
- Employers required by state or federal law or regulations, or by a self-regulatory organization (such as FINRA), to use an individual's consumer credit history for employment purposes.
- Police officers, peace officers and others with a law enforcement or investigative function at the City's Department of Investigation (DOI).
- Certain appointed positions subject to background investigation by the DOI.
- Positions in which an employee is required to be bonded under city, state or federal law.
- Positions in which an employee is required to possess security clearance under federal law or the law of any state.
- Non-clerical positions with regular access to "trade secrets," "intelligence information" or "national security information," as those terms are defined in the bill.
- The bill defines "trade secrets" as "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 bill excludes from "trade secrets" "general proprietary company information such as handbooks and policies," and notes that "regular access to trade secrets" "does not include access to or the use of client, customer or mailing lists."
- Notably, the bill provides no further detail as to what would qualify as a "trade secret." This gap in the bill is an area where litigation is likely to ensue.
- Positions with signatory authority over third-party funds or assets valued at $10,000 or more; or 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.
- 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 would provide aggrieved applicants and employees the same rights and remedies afforded to an individual asserting any other claims under the New York City Human Rights Law.
Mayor Bill de Blasio is likely to sign the bill into law shortly. The bill would become effective 180 days from enactment.
In taking such action, New York City joins at least 11 other states and municipalities (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, Washington and the city of Chicago) in restricting employers' use of credit checks, although the New York City bill is significantly more restrictive.
The bill already is being characterized by New York City council members and others as the "strongest" bill to address use of credit history in employment. For example, in Oregon and several other states with similar laws, employers generally may consider credit history information where it is "substantially job-related." Other states, like Maryland, exempt positions where an expense account or corporate debit or credit card is provided, as well as positions with access to personal customer, employee or employer information. A number of jurisdictions broadly exempt financial institutions and banks from their restrictions on use of credit history in employment, and some even exempt managerial and supervisory positions. The New York City bill contains no such exemptions.
The bill is the latest development in a growing trend—both in New York and elsewhere—to limit pre-employment inquiries. Employers should review and be prepared to revise their policies and practices with respect to background checks that include credit history information to ensure compliance with the bill. They also may want to review job descriptions to identify positions that may be exempt from the bill's coverage.
Employers should be aware that even in the absence of a city or state law restricting consideration of credit history in employment, they should be sensitive to potential adverse impact under Title VII. Although the EEOC lost its argument—in EEOC v. Kaplan Higher Education Corp., No. 13-3408, 2014 WL 1371897 (6th Cir. April 9, 2014)—that credit checks on applicants for certain positions "screened out" more African-Americans, resulting in prohibited disparate impact treatment based on race under Title VII, it continues to closely focus on the issue. As with consideration of criminal convictions, blanket rules disqualifying applicants on the basis of credit history are significantly risky, and individualized assessments may be worthwhile instead..