New
York City issues interpretative guidelines on their credit restriction law
“Stop Credit Discrimination Employment Act”. New York City employers should
review these guidelines :
NOTE: Portions of this guide will be subject to
future rulemaking pursuant to the City Administrative Procedure Act, N.Y. City
Charter § 1041 et seq.
The New York City Human
Rights Law (hereinafter the “NYCHRL”) prohibits discrimination in employment,
public accommodations, and housing. It also prohibits discriminatory harassment
and bias-based policing by law enforcement.
The NYCHRL, pursuant to
the 2005 Civil Rights Restoration Act, must be construed “independently from
similar or identical provisions of New York state or federal statutes,” such
that “similarly worded provisions of federal and state civil rights laws [are]
a floor below which the City’s Human Rights law cannot fall, rather than a
ceiling above which the local law cannot rise.”1
The Stop Credit
Discrimination in Employment Act (“SCDEA”), which goes into effect on September
3, 2015, amends the NYCHRL by making it an unlawful discriminatory practice for
employers, labor organizations, and employment agencies to request or use the
consumer credit history of an applicant or employee for the purpose of making
any employment decisions, including hiring, compensation, and other terms and
conditions of employment. N.Y.C. Admin. Code §§ 8-102(29), 8-107(24).
The SCDEA also makes it an
unlawful discriminatory practice for a City agency to request or use, for
licensing or permitting purposes, information contained in the consumer credit
history of an applicant, licensee or permittee. Id. at §
8-107(9)(d)(1).
As of September 3, 2015,
this document serves as the Commission’s interpretative enforcement guidance of
the SCDEA’s protections. 2
The SCDEA reflects the
City’s view that consumer credit history is rarely relevant to employment
decisions, and consumer reports should not be requested for individuals seeking
most positions in New York City. In enacting the SCDEA, the City Council
intended for it to “be the strongest bill of its type in the country
prohibiting discriminatory employment credit checks.” 3
The SCDEA is intended to stop employers from using consumer credit history when making employment decisions—a practice that has a disproportionately negative effect on unemployed people, low income communities, communities of color, women, domestic violence survivors, families with children, divorced individuals, and those with student loans and/or medical bills.
The City Council noted that multiple studies have failed to demonstrate any correlation between individuals’ credit history and their job performance. 4
II. Definitions
The SCDEA is intended to stop employers from using consumer credit history when making employment decisions—a practice that has a disproportionately negative effect on unemployed people, low income communities, communities of color, women, domestic violence survivors, families with children, divorced individuals, and those with student loans and/or medical bills.
The City Council noted that multiple studies have failed to demonstrate any correlation between individuals’ credit history and their job performance.
The SCDEA defines “consumer
credit history” to mean an individual’s “credit worthiness, credit
standing, credit capacity, or payment history, as indicated by:
Under the SCDEA, a consumer
credit report includes “any written or other communication of any
information by a consumer reporting agency that bears on a consumer’s
creditworthiness, credit standing, credit capacity or credit history.”
- a consumer credit report;
- credit score; or
- information an employer obtains directly from the individual regarding
- details about credit accounts, including the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, prior credit report inquiries, or
- bankruptcies, judgments or liens.” N.Y.C. Admin. Code § 8-102(29).
Companies that provide
reports containing information about people’s payment history to creditors, the
amount of people’s credit and credit consumption, and information from debt
buyers and collectors are considered consumer reporting agencies for purposes
of the SCDEA, though the definition of a “consumer reporting agency” is not
confined to such companies. “Consumer reporting agency” includes any
person or entity that, for monetary fees, dues, or on a cooperative nonprofit
basis, engages in whole or in part in the practice of assembling or evaluating
consumer credit information or other information on consumers for the purpose
of furnishing consumer reports or investigative consumer reports to third
parties. Note that, unlike the definition of a “consumer reporting agency”
under the New York State Fair
Credit Reporting Act
(“FCRA”), a person need not regularly engage in assembling or
evaluating consumer credit history in order to be a “consumer reporting agency”
under the SCDEA.
III.
Violations of the SCDEA
After September 2, 2015,
the following acts will be separate chargeable violations of the NYCHRL:
- Requesting consumer credit history from job applicants or potential or current employees, either orally or in writing;
- Requesting or obtaining consumer credit history of a job applicant or potential or current employee from a consumer reporting agency; and
- Using consumer credit history in an employment decision or when considering an employment action.
The SCDEA does not prevent
employers from researching potential employees’ background and experience,
evaluating their résumés and references, and conducting online searches (e.g.,
Google and LinkedIn).
IV. Positions Exempted from the SCDEA’s Anti-Discrimination Provisions
Consistent with the broad
scope of the NYCHRL, all exemptions to coverage under the SCDEA’s
anti-discrimination provisions are to be construed narrowly. Employers may
claim an exemption to defend against liability, and they have the burden of
proving the exemption by a preponderance of the evidence. No exemption applies
to an entire employer or industry. Exemptions apply to positions or roles, not
individual applicants or employees.
A. Employers
required by state or federal law or regulation or by the Financial Industry
Regulatory Authority (“FINRA”) to use an individual’s consumer credit history
for employment purposes.
FINRA members are exempt
from the SCDEA when making employment decisions about people who are required
to register with FINRA.5 FINRA members must comply with the SCDEA,
however, when making employment decisions regarding people who are not required
to register with FINRA. These individuals perform functions that are supportive
of, or ancillary or advisory to, “covered functions”6 or engage
solely in clerical or ministerial activities.7
As of the date of this
interpretive guidance, the only New York law requiring the evaluation of a
current or potential employee’s consumer credit history applies to licensed
mortgage loan originators. N.Y. Bank. L. § 559-d(9). This law was enacted to
comply with the requirements of the federal SAFE Mortgage Licensing Act of
2008. 12 U.S.C. § 5104(a)(2)(A).
B. Police
officers, peace officers, or positions with a law enforcement or investigative
function at the Department of Investigation (“DOI”).
Police and peace officers
are limited to their definitions in New York Criminal Procedure Law §§ 1.20(34)
and 2.10, respectively. The SCDEA’s anti-discrimination provisions still apply
when making employment decisions about civilian positions; only positions for
police or peace officers are exempt from the SCDEA.
The DOI has several
positions that do not serve investigative functions. Certain operations and
communications positions are examples of positions to which the SCDEA’s
anti-discrimination provisions still apply.
C. Positions
subject to a DOI background investigation.
For certain positions with
the City of New York, the DOI conducts background checks that involve collecting
consumer credit history from the job applicant. The DOI may provide some of the
information collected from the background check to the City agency interviewing
or hiring the job applicant. Under the SCDEA, City agencies may not request or
use consumer credit history collected by the DOI in making employment decisions
unless:
- The position is appointed; and
- The position requires a high degree of public trust.
- Commissioner titles, including Assistant, Associate, and Deputy Commissioners;
- Counsel titles, including General Counsel, Special Counsel, Deputy General Counsel, and Assistant General Counsel, that involve high-level decision-making authority;
- Chief Information Officer and Chief Technology Officer titles; and
- Any position reporting to directly to an agency head.
D. Positions
requiring bonding under federal, state, or City law or regulation.
In order for this
exemption to apply, the specific position must be required to be bonded under
City, state, or federal law, and bonding must be legally required, not simply
permitted, by statute. For example, the following positions must be bonded:
Bonded Carriers for U.S.
Customs, 19 C.F.R. § 112.23; Harbor Pilot, N.Y. Nav. L. § 93; Pawnbrokers, N.Y.
Gen. Bus. L. § 41; Ticket Sellers & Resellers, N.Y. Arts & Cult. Aff.
L. §§ 25.15, 25.07; Auctioneers, N.Y. City Admin. Code § 20-279; and Tow Truck
Drivers, § 20-499.
E. Positions
requiring security clearance under federal or state law.
This exception only
applies when the review of consumer credit history will be done by the federal
or state government as part of evaluating a person for security clearance, and
that security clearance is legally required for the person to fulfill the job
duties. Having “security clearance” means the ability to access classified
information, and does not include any other vetting process utilized by a
government agency.
F. Non-clerical
positions having regular access to trade secrets, intelligence information, or
national security information.
The SCDEA 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 SCDEA limits the trade
secret definition to exclude “general proprietary company information such as
handbooks and policies” and “access to or the use of client, customer, or mailing
lists.”
Consistent with this
definition and the broad scope of the NYCHRL, “trade secrets” do not include
information such as recipes, formulas, customer lists, processes, and other
information regularly collected in the course of business or regularly used by
entry-level and non-salaried employees and supervisors or managers of such
employees.
The SCDEA defines “intelligence
information” as “records and data compiled for the purpose of criminal
investigation or counterterrorism, including records and data relating to the
order or security of a correctional facility, reports of informants,
investigators or other persons, or from any type of surveillance associated
with an identifiable individual, or investigation or analysis of potential
terrorist threats.” Positions having regular access to intelligence information
shall be narrowly construed to include those law enforcement roles that must
routinely utilize intelligence information.
The SCDEA defines “national
security information” as “any knowledge relating to the national defense
or foreign relations of the United States, regardless of its physical form or
characteristics, that is owned by, produced by or for, or is under the control
of the United States government and is defined as such by the United
Statesgovernment and its agencies and departments.” Positions having regular
access to national security information shall be narrowly construed to include
those government or government contractor roles that require high-level
security clearances.
The intelligence and
national security exemptions encompass those few occupations not already
subject to exemptions for police and peace officers or where credit checks are
required by law.
G. Positions
involving responsibility for funds or assets worth $10,000 or more.
In general, this exemption
includes only executive-level positions with financial control over a company,
including, but not limited to, Chief Financial Officers and Chief Operations
Officers. This exemption does not include all staff in a finance department.
H. Positions
involving digital security systems.
This exemption includes
positions at the executive level, including, but not limited to, Chief
Technology Officer or a senior information technology executive who controls
access to all parts of a company’s computer system. The exemption does not
include any person who may access a computer system or network available to
employees, nor does it include all staff in an information technology
department.
V. Employers’
Record of Exemption Use
An employer claiming an
exemption must show that the position or role falls under one of the eight (8)
exemptions in Part IV above. Employers availing themselves of exemptions to the
SCDEA’s anti-discrimination provisions should inform applicants or employees of
the claimed exemption. Employers should also keep a record of their use of such
exemptions for a period of five (5) years from the date an exemption is used.
Keeping an exemption log will help the employer respond to Commission requests
for information.
The exemption log should
include the following:
- The claimed exemption;
- Why the claimed exemption covers the exempted position;
- The name and contact information of 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 claimed exemption;
- How the credit history was obtained; and
- How the credit history led to the employment action.
Employers may be required
to share their exemption log with the Commission upon request. Prompt responses
to Commission requests may help avoid a Commission-initiated investigation into
employment practices.
VI. Penalties for administrative actions
The Commission takes
seriously the SCDEA’s prohibitions against asking about or using consumer
credit history for employment purposes and will impose civil penalties up to
$125,000 for violations, and up to $250,000 for violations that are the result
of willful, wanton or malicious conduct. The amount of a civil penalty will be
guided by the following factors, among others:
- The severity of the violation;
- The existence of subsequent violations;
- The employer’s size, considering both the total number of employees and its revenue; and
- The employer’s actual or constructive knowledge of the SCDEA.
These penalties are in
addition to the other remedies available to people who successfully resolve or
prevail on claims under the NYCHRL, including, but not limited to, back and
front pay, along with compensatory and punitive damages.
Aurico recommends that
employers in NYC review their policy on ordering credit reports and determine
if their positions fall within the exclusions as listed in the guidance and
make applicable changes to their existing policies. Aurico encourages employers
to review their background screening and drug testing policies regularly at
least once a year.
1 Local Law No. 85 (2005);
see also N.Y.C. Admin. Code § 8-130 (“The provisions of this title shall be
construed liberally for the accomplishment of the uniquely broad and remedial
purposes thereof, regardless of whether federal or New York State civil and
human rights laws, including those laws with provisions comparably-worded to
provisions of this title have been so construed.”).
2 The Commission does not
have jurisdiction to enforce federal and state fair credit reporting laws,
which require employers to give applicants notice and get their permission
before obtaining a consumer report about them. 15 U.S.C. § 1681d; N.Y. Gen.
Bus. L. § 380-b(b).
3 Council Member Brad S.
Lander, Hearing Transcript of the New York City Council Stated Meeting, 63
(Apr. 16, 2015), available at http://legistar.council.nyc.gov/Legislation.aspx
(last accessed Aug. 12, 2015).
4 Report of the
Governmental Affairs Division, Committee on Civil Rights, 4 (April 14, 2015)
(available through http://legistar.council.nyc.gov/Legislation.aspx, last
accessed Aug. 28, 2015).
5 FINRA, Rule 1230 and
3110(e).
6 FINRA, Rule
1230(b)(6)(B).
7 FINRA, Rule 1230.06;
FINRA Regulatory Notice 11-33.
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