All New York City employers should be aware of the Stop Credit Discrimination in Employment Act ("SCDEA"), which is now in effect. The SCDEA prohibits New York City employers from requesting or using the credit history of applicants and employees when making employment decisions. The enforcement guidance recently issued by the City Commission on Human Rights (the "Commission") reflects that the SCDEA will be interpreted broadly to bar most employer credit history checks and that the consequences of non-compliance can be severe.
The Commission's view is 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." Accordingly, an employer violates the SCDEA if it does any the following: (1) requests consumer credit history from job applicants or potential or current employees, either orally or in writing; (2) requests or obtains consumer credit history from job applicants or potential or current employees from a consumer reporting agency; or (3) uses consumer credit history in an employment decision or when considering an employment action. This is a very onerous standard, as a bare request to an employee will be deemed a violation of the SCDEA even if the employer does not use the information and even if it does not take any adverse employment action as a result of the inquiry or the information obtained.
The SCDEA includes exemptions for certain positions, including positions with control of funds or assets worth $10,000 or more, non-clerical positions with regular access to trade secrets (which is defined narrowly), positions with control over digital security systems, and positions for which credit checks are required by law or self-regulatory organizations. The burden is on the employer to show that an exemption applies and the exemptions are to be construed narrowly.
The Commission's guidance provides the following helpful information as to those exemptions:
- The exemption for positions involving responsibility for funds or assets worth $10,000 or more applies only to "executive-level positions with financial control over a company including, but not limited to, Chief Financial Officers and Chief Operations Officers" and does not apply to "all staff in a finance department."
- FINRA members are exempt from the SCDEA only as to decisions concerning "covered persons" (as defined under FINRA Rule 1230(b)(6)(A)).
- 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 exemption for positions with control over digital security systems 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." This 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."
If an employer believes a position is exempt, it should "inform applicants or employees of the claimed exemption" and maintain for five years an "exemption log" detailing the use of exemptions to perform credit checks. Employers may have to share logs with the Commission, and if those logs are maintained in a manner compliant with the specific rules the employer may be able to avoid a Commission-initiated investigation.
As it typically the case under the New York City Human Rights Law, the consequences of non-compliance can be quite harsh. Employers may be liable for compensatory damages (including front pay and back pay), punitive damages, and attorneys' fees and costs, as well as a civil penalty of up to $250,000 for willful violations.
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