Effective September 3, 2015, a new statute prohibits most employers in New York City, other than employers in the securities industry, from requesting or using an employee’s or a job applicant’s consumer credit history in making employment decisions.
Specifically, on May 6, 2015, New York City Mayor Bill de Blasio signed, into law, Local Law 37 of 2015 (“Local Law 37” or the “new Law”). On April 16, 2015, the New York City Council had approved Local Law 37 by a tally of 47 to 3.
The new law, which takes effect on September 3, 2015, prohibits businesses in New York City with four or more employees from requesting or using ” ‘consumer credit history’ ” for employment purposes, and from otherwise “discriminat[ing] against an applicant or employee with regard to hiring, compensation, or the terms, conditions or privileges of employment” based on the applicant’s or employee’s consumer credit history.
For the new law’s purposes, ” ‘consumer credit history’ ” means “an individual’s credit worthiness, credit standing, credit capacity, or payment history,” as indicated by (i) a consumer credit report, (ii) a credit score, or (iii) information an employer obtains directly from the employee or job applicant about (a) bankruptcies, judgments or liens or (b) number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, or previous credit report inquiries.
Local Law 37 amends sections 8-102 and 8-107 of the New York City Human Rights Law, N.Y. City Admin. Code §§ 8-101 – 8-131.
The new law’s prohibition of employers in New York City from requesting or using consumer credit history for employment purposes does not apply to employers that are required, by federal or state law or by a self-regulatory organization (an “SRO”) as defined by the Securities Exchange Act of 1934, to consider consumer credit history for employment purposes.
Thus, for example, employers in the securities industry remain free to consider consumer credit history for employment purposes.
Firms in the securities industry fall within Local Law 37’s above-mentioned, ‘required by law’ exemption because the Financial Industry Regulatory Authority, Inc. (“FINRA”), an SRO, requires firms in the securities industry “to ascertain by investigation the good character, business repute, qualifications, and experience” of a job applicant before the firm applies to register that applicant with FINRA. See FINRA R. 3010(e); see also Disclosure Questions 14I, 14K, and 14M of the Form U-4 (Uniform Application for Securities Industry Registration or Transfer) (asking prospective employees in the securities industry about bankruptcies, judgments and liens).
The new law’s banning of businesses in New York City from asking for or utilizing consumer credit history for employment purposes does not apply to, among other excepted positions:
- Police officer and peace officer positions;
- Non-clerical jobs with regular access to trade secrets, intelligence information or national security information;
- Positions with (i) signing authority over third party funds or assets valued at $10,000 or more or (ii) authority to enter, on the employer’s behalf, into financial agreements valued at $10,000 or more; and
- Jobs 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.
Workers or job applicants whose employers or prospective employers discriminate against them based on their consumer credit histories, like employees aggrieved by other discriminatory practices made unlawful by the New York City Human Rights Law, may sue their employers for and may recover, among other remedies, non-capped compensatory damages, punitive damages, and, if they prevail and at the court’s discretion, costs and reasonable attorney’s fees. See N.Y.C. Admin. Code § 8-502(a), 8-502(g).
Take-Aways for Employers
Employers in New York City must review and revise their their present applications for employment by removing requests for the job applicant’s consumer credit history. Further, employers in New York City must review and modify their present workplace policies, employee handbooks, and job advertisements to make clear that the employers do not discriminate in hiring, compensation, or the terms and conditions of employment based on an applicant’s or an employee’s consumer credit history. So, too, employers in the City should train supervisors and managers concerning the employer’s and the trainees’ obligations not to base employment decisions on a worker’s or a job applicant’s consumer credit history.