NYC Law Expected To Change Employer Use of Credit Checks

The City of New York likely will tighten the reins on an employer’s ability to use credit checks when making hiring and retention decisions. The City Council approved a bill that would amend the New York City Human Rights Law, § 8-102 et seq. (“NYCHRL”) to prohibit an employer, labor organization, employment agency, or their agents from using an applicant’s or employee’s “consumer credit history” for employment purposes or to otherwise discriminate against an applicant or employee based on consumer credit history. If the legislation is signed by the Mayor – on whose desk the proposed bill now sits –  it will go into effect within 120 days after the Mayor signs.

The proposed bill contains limited exceptions listed below that permit the use of credit checks for hiring and retention decisions. The NYCHRL already contains provisions that replicate the New York State Human Rights Law, Executive Law §290 et seq. and New York Corrections Law, Art. 23-A, which require an individualized assessment of an applicant or employee before disqualifying the applicant or negatively affecting the employee based on the results of a criminal background check. Moreover, existing New York laws require that an employer’s decision to disqualify an applicant be justified using a variety of reasons and ultimately based on a direct correlation between the nature of the job and the applicant’s criminal history, an unreasonable risk to property, or the safety or welfare of specific individuals or the general public. These existing limitations stand separate from the requirements of the Federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. and the New York State Fair Credit Reporting Act, General Business Law Art. 25.

Exceptions to the proposed NYCHRL amendment involve the following situations:

• Where consumer credit history is required by state or federal law or regulations or by a self-regulatory organization for employment purposes;
• Police officers, peace officers, position with a law enforcement, or an investigative function at the Department of Investigation;
• Certain appointed positions involving a high degree of trust at the Department of Investigation;
• 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 position having regular access to trade secrets, intelligence information, or national security information;
• Positions with signatory authority over third party funds or assets valued at $10,000 or more or that involves a fiduciary responsibility to the employer with the authority to enter financial agreements valued at $10,000 or more for the employer; and
• 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 proposed law also does not affect the rules pertaining to City employee disclosures to the NYC Conflicts of Interest Board.

The exception above relating to non-clerical employees with access to trade secrets appears to be more subjective and leaves room for interpretation.

Employers should be prepared to revisit and revise their hiring practices and policies that rely upon credit checks. For questions about this blog, or about the use of background checks and applicable policies and procedures in general, please contact an attorney in the Gibbons Employment & Labor Law Department.