The New York City Commission on Human Rights has issued interpretive enforcement guidance for the Stop Credit Discrimination in Employment Act . 

The SCDEA amended the New York City Human Rights Law and made it an unlawful discriminatory practice for an employer in New York City to use or request an employee’s or applicant’s consumer credit history, except in certain enumerated circumstances.  (See our May alert.) The guidance, which went into effect on September 3, 2015, provides important insight for employers on how the new law will be enforced.

The SCDEA does not prevent employers from researching applicants’ experience, evaluating their references and resumes and conducting online searches (e.g., via LinkedIn or Google).  The Commission’s guidance clarifies, however, that consumer credit history is “rarely” relevant to employment decisions and that consumer reports should not be requested for “most positions” in New York City. 

Specifically, other than in circumstances where an exemption applies, the following acts are identified as separate violations of the NYCHRL (regardless of whether the practice leads to an adverse employment action):  (1) Requesting (orally or in writing) consumer credit history from applicants or employees; (2) requesting or obtaining credit history from an applicant or employee from a consumer reporting agency; and (3) using consumer credit history when making or considering an employment action.  Notably, whether an adverse employment action occurred is irrelevant to a finding of employer liability, but can be considered when determining penalties. 

While the SCDEA provides for limited carveouts for certain employers to request or consider an individual’s credit history for employment purposes, the guidance explains the “narrow” situations in which these exemptions apply.  The guidance clarifies:

  • No blanket exemption applies to an entire employer or industry.  Rather, exemptions apply to certain positions or roles.  Employers have the burden of proving an SCDEA exemption by a preponderance of the evidence.
  • FINRA members are exempt from the SCDEA only when making employment decisions about individuals required to register with FINRA.  FINRA members must comply with the SCDEA when making employment decisions regarding individuals not required to register with FINRA.
  • Non-clerical positions having regular access to trade secrets, intelligence information or national security information are exempt from the SCDEA.  However, the guidance narrowly defines “trade secrets” to exclude “general proprietary company information such as handbooks and policies,” “access to or the use of client, customer or mailing lists” and “other information regularly collected in the course of business or regularly used by entry-level and non-salaried employees and supervisor or managers of such employees.” 
  • Positions involving responsibility for funds or assets worth $10,000 or more are exempt from the SCDEA; however, this exemption generally includes only executive-level positions with financial control over a company (i.e. Chief Financial Officers and Chief Operations Officers), not all staff in a finance department.
  • Positions involving digital security systems are exempt; however, this exemption is limited to positions at the executive level (i.e. Chief Technology Officer or senior IT executives) and does not include all staff in an IT department or individuals who may access a computer network available to all employees. 
  • Police and peace officers are exempt from the SCDEA, as are positions requiring security clearance or bonding under the law. 
  • New York City agencies may not request or use consumer credit history collected by the Department of Investigation unless the position is appointed and is defined as requiring a high degree of public trust.

The new enforcement guidance also explains that employers claiming an exemption must show that the position falls under one of the SCDEA’s eight exemptions.  Applicants and employees must be informed if an employer avails itself of an exemption, and employers must keep a log of exemptions for a period of five years from the date an exemption is used (and may be required to share their log with the Commission upon request).  The log must include:

  • The claimed exemption
  • Why the claimed exemption covers the exempted position
  • The name and contact information for all applicants (or employees) considered for the exempted position
  • The job duties of the exempted position
  • The qualifications necessary to perform the exempted position
  • A copy of the applicant’s (or employee’s) credit history that was obtained pursuant to the exemption
  • How the credit history was obtained and
  • How the credit history led to the employment action.  

Finally, in addition to the remedies generally available under the NYCHRL (including back and front pay and compensatory and punitive damages), employers who violate the SCDEA can be charged with civil penalties up to $125,000 and up to $250,000 for violations resulting from willful, wanton or malicious conduct.  Factors to be considered in assessing civil penalties include:  the severity of the violation; the existence of subsequent violations; the employer’s size (including both revenue and number of employees); and actual or constructive knowledge of the law. 

In light of this enforcement guidance, employers in New York City who use, or are considering using, credit-related information for employment purposes should carefully evaluate, on a case-by-case basis, whether any exemptions to the SCDEA apply before requesting the credit history of applicants or employees, and should scrupulously comply with the recordkeeping requirements of the SCDEA if it is determined that an exemption is warranted.