New York City Bans Most Employers From Using Credit Checks
Author: David B. Weisenfeld, XpertHR Legal Editor
May 8, 2015
New York City Mayor Bill de Blasio has signed a law prohibiting most employers from using credit reports or bankruptcies to disqualify job candidates from being hired or when making any other sort of employment decision regarding current employees. The law also gives aggrieved applicants and employees the right to sue, so Big Apple employers should immediately review their background check policies.
Effective September 3, 2015, the Stop Credit Discrimination in Employment Act amends the City's Human Rights Law to make it an unlawful discriminatory act for most employers to ask about a prospective or current employee's credit history. This credit check law is one of the broadest in the nation as it defines "credit history" to include not just a consumer credit report, but also any information directly obtained from applicants or employees relating to their credit history.
The law applies to all New York City employers with four or more employees. However, there are limited exemptions provided for certain positions, including:
- Law enforcement personnel;
- Financial services workers;
- Employees with signatory power over assets of $10,000 or more; and
- Workers with access to trade secrets or national security information.
Supporters of the New York City law and similar measures claim there is no connection between credit history and job performance, and that the use of credit reports in the employment process has a disproportionate impact on minorities.
In all, 10 states have laws restricting employers from seeking or using credit information for employment purposes although New York State is not among them. The most recent states to add such prohibitions were Nevada and Colorado in 2013. The Nevada law attracted attention because its penalty provision could require noncompliant employers to pay up to $9,000 per violation on top of any legal relief a jilted job applicant or employee may obtain by suing an employer for damages.
Federal law does not prohibit employers from asking about a job applicant's credit history so long as they comply with the Fair Credit Reporting Act (FCRA) and its accompanying notice and consent requirements.