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New York City Bans Employer Credit Checks

On May 6, 2015, New York City Mayor Bill de Blasio signed into law an amendment to the New York City Human Rights Law (NYCHRL) that precludes employers from running credit checks on most job applicants and employees. The amendment takes effect on September 2, 2015, and applies to all New York City employers with at least four employees.

The New Law

The NYCHRL amendment makes it an unlawful discriminatory practice for an employer, labor organization, employment agency, or the employer’s agent (1) to request or use the consumer credit history of an applicant or employee for employment purposes, or (2) to discriminate against an applicant or employee with regard to hiring, compensation, or the terms, conditions or privileges of employment based on that individual’s consumer credit history. Consumer credit history is defined as an individual’s creditworthiness, credit standing, credit capacity, or payment history. Prohibited sources of consumer credit history include consumer credit reports, credit scores, or information obtained directly from the individual.

New York City is the twelfth jurisdiction to restrict the use of credit checks for employment purposes. California, Chicago, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington have passed similar laws in recent years.

Limited Exceptions

The NYCHRL’s ban on credit checks does not apply to employers that are required by state or federal law or regulation, or by a national securities exchange, registered securities association, or registered clearing agency, to use an individual’s consumer credit history for employment purposes.

Additionally, the ban does not apply to persons applying for or employed in the following positions:

  1. a position subject to background investigation by the department of investigation, provided, however, that the appointing agency may not use consumer credit history information for employment purposes unless the position is an appointed position in which a high degree of public trust, as defined by the commission in rules, has been reposed,

  2. a position as police or peace officer, or in a position with a law enforcement or investigative function at the department of investigation,

  3. a position requiring bonding under City, state, or federal law,

  4. a position in which security clearance is required by federal or state law,

  5. a non-clerical position having regular access to trade secrets, intelligence information or national security information,

  6. a position having signatory authority over third party funds or assets valued at $10,000 or more, or that involve fiduciary responsibility to the employer with the authority to enter financial agreements valued at $10,000 or more on behalf of the employer, or

  7. a position 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.

Employers running consumer credit checks for the above positions still must comply with state and federal Fair Credit Reporting Act consent and notice requirements.

Penalties

Individuals aggrieved by an unlawful credit check may file a complaint with the New York City Commission on Human Rights or file a private civil action in a New York court. Remedies include hire, reinstatement, back pay, front pay, compensatory and punitive damages, and attorneys’ fees and costs, as well as a civil penalty.

Review of Credit Check Policies and Practices Recommended

Most New York City employers that run consumer credit checks on applicants or employees will be affected by the NYCHRL amendment. Employers should use the time prior to September 2 to review and update their background check policies to ensure compliance.  

© 2019 Schiff Hardin LLP

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About this Author

Schiff Hardin represents management in labor matters and employment-related litigation, and provides counsel to employers with respect to all legal aspects of employer-employee relations. Our firm's labor law practice encompasses both the private sector and the public sector for large and small employers in a broad range of markets and industries. Our Labor and Employment Group works cooperatively with attorneys in our Employee Benefits and Executive Compensation Group to provide our clients with comprehensive assistance in every aspect of the employer-employee relationship.

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