As we blogged about
previously, Mayor Bill De Blasio signed into law the
Stop Credit Discrimination in Employment Act
("SCDEA") in May. The SCDEA went into effect on
September 3, 2015 and it prohibits employers from using an
individual's consumer credit history when making employment
decisions about applicants or current employees. The New York
City Commission on Human Rights (NYCCHR) recently issued
enforcement guidance on the SCDEA and its already limited
exemptions. The enforcement guidance reflects the
NYCCHR's intent to adopt an expansive view of the SCDEA and to
construe its exemptions narrowly. The NYCCHR has also begun
an education campaign regarding the SCDEA, which may prompt
increased inquiries by employees and applicants regarding the
law.
According to the text of the SCDEA, employers may conduct credit
checks on the following positions:
2. police officers, peace officers, or those in a position with law enforcement or investigative function at the City of New York Department of Investigation ("DOI") (or in certain positions subject to background investigation by the DOI);
3. certain positions working for the City of New York subject to a background investigation by the DOI;
4. positions requiring the employee to be bonded by City, state or federal law;
5. positions requiring the employee to possess a security clearance under federal or state law;
6. non-clerical positions having regular access to trade secrets, intelligence information or national security information;
7. positions having signatory authority over third party funds or assets valued at $10,000 or more, or positions that involve a fiduciary responsibility to the employer with authority to enter financial agreements on behalf of the employer for $10,000 or more; and
8. positions that allow the employee to modify digital security systems protecting the employer or client's networks or databases.
The NYCCHR's enforcement guidance states that employers
claiming an exemption must show that the position or role falls
under one of the eight exemptions in the SCDEA and that employers
should inform applicants or employees of the claimed
exemption. In addition, employers should keep a detailed
record of the claimed exemption under which the credit check is
performed, the name and contact information of all applicants or
employees considered for the exempted position, the duties and
qualifications for the position, a copy of the applicant or
employee's credit history that was obtained pursuant to the
claimed exemption, and a record of how the credit history was
obtained. Employers are encouraged to maintain a record of
the checks performed pursuant to an exemption along with the
information outlined above for 5 years, and they may be required to
furnish this information to the NYCCHR upon request.
The enforcement guidance calls for a narrow construction of the
SCDEA's exemptions, and outlines several nuances not apparent
from the text of the law. For instance, the enforcement
guidance states that "FINRA members are exempt from the SCDEA
when making employment decisions about people who are required to
register with FINRA," under the exemption for "employers
required by state or federal law or regulations, or by a
self-regulatory organization as defined in Section 3(a)(26) of the
Securities Exchange Act." However, the guidance goes on
to explain that this exemption only covers employment decisions
regarding "people who are required to register with
FINRA." FINRA members must comply with the SCDEA and
cannot rely on information about an applicant or employee's
credit history when making employment decisions regarding
individuals whose functions are "supportive of, or ancillary
to, 'covered functions,' or engage solely in clerical or
ministerial activities."
The enforcement guidance also clarifies the narrow
interpretation of the SCDEA's exemption for individuals in
"positions having signatory authority over third party funds
or assets valued at $10,000 or more, or positions that involve a
fiduciary responsibility to the employer with authority to enter
financial agreements on behalf of the employer for $10,000 or
more." While the text of the law can be read to exempt
these individuals broadly, the NYCCHR's enforcement guidance
states that this exemption only applies to individuals in
"executive-level positions with financial control over a
company, including, but not limited to, Chief Financial Officers
and Chief Operations Officers" and not to all staff in a
finance department whose signatory authority over third party funds
is greater than $10,000.
Similarly, while the text of the law seemingly exempts
"positions that allow the employee to modify digital security
systems protecting the employer or client's networks or
databases," the enforcement guidance explains that this
exemption only applies to "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." As such, employers
cannot rely on this exemption to conduct credit checks on
individuals who merely have access to "a computer system or
network available to employees, nor does the exemption include all
staff in an information technology department."
Employers should exercise extra caution when relying on the
SCDEA's exemptions as the NYCCHR can impose civil penalties for
violations of the SCDEA of up to $125,000, and of up to $250,000
for violations that are the result of willful, wanton, or malicious
conduct. These penalties are in addition to other remedies
available to private litigants who claim that the employer's
use of their credit history violates the New York City Human Rights
Law. Remedies under the New York City Human Rights Law may
include, but are not limited to, back and front pay, along with
compensatory and punitive damages and attorney's fees.
As always, we are available to answer any questions employers may
have regarding the SCDEA. Employers should evaluate and
reassess their practices and procedures with respect to
employment-related credit checks in light of this new law and
enforcement guidance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.