New York City’s Stop Credit Discrimination in Employment Act (SCDEA) amended the NYC Human Rights Law by making it an unlawful discriminatory practice for employers, labor organizations, and employment agencies to request or use the consumer credit history of an applicant or employee for the purpose of making any employment decisions, including hiring, compensation, and other terms and conditions of employment. Under the SCDEA, employers may request and consider the consumer credit history information of applicants and employees only in certain, limited circumstances, as well as in response to any lawful subpoena, court order, or law enforcement investigation. Narrow exemptions to the new prohibition include the following:
- Employers required by state or federal law or regulation or by the Financial Industry Regulatory Authority (FINRA) to use an individual’s consumer credit history for employment purposes;
- Police officers, peace officers, or positions with a law enforcement or investigative function at the Department of Investigation (DOI);
- Positions subject to a DOI background investigation;
- Positions requiring bonding under federal, state, or City law or regulation;
- Positions requiring security clearance under federal or state law;
- Non-clerical positions having regular access to “trade secrets” (excluding general proprietary company information such as handbooks and policies, or client/customer/mailing lists), intelligence information, or national security information. (Note that the definition of “trade secrets” under the SCDEA is extremely narrow, and excludes general proprietary company information such as handbooks and policies, 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.);
- Positions involving responsibility for funds or assets worth $10,000 or more (i.e., Chief Financial Officer, Chief Operations Officer); and
- Positions involving digital security systems (i.e., Chief Technology Officer or senior information technology executive who controls access to all parts of a company’s computer system).
Employers claiming an exemption must keep a written record or “exemption log” of their use of exemptions for a period of five years from the date an exemption is used containing the following information:
- The claimed exemption;
- Why the claimed exemption covers the exempted position;
- The name and contact information of all applicants or employees considered for the exempted position;
- The job duties of the exempted position;
- The qualifications necessary to perform the exempted position;
- A copy of the applicant’s or employee’s credit history that was obtained pursuant to the claimed exemption;
- How the credit history was obtained; and
- How the credit history led to the employment action.
Employers should take great care in preparing the “exemption log,” both because of its necessity in avoiding liability under the SCDEA (which imposes civil penalties up to $125,000 for violations, and up to $250,000 for violations that are the result of “willful, wanton or malicious conduct,” in addition to the typical damages available under the NYCHRL), but also because of the role these records could end up playing in creating liability under other laws, such as Title VII (as enforced by the Equal Employment Opportunity Commission) and the Fair Credit Reporting Act (which governs the proper procedures for obtaining most pre-employment background and credit checks).
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