New York City Banning Use of Credit History in Employment Decisions

Many employers consider credit ratings of potential employees when making hiring decisions, as well as decisions concerning promotion and pay rates.  This practice often results in discrimination against lower income and minority applicants. The Stop Credit Discrimination in Employment Act bans the use of credit histories in employment decisions regarding potential and existing workers within New York City. The provision was added as an amendment to the city’s Human Rights Law and goes into effect on September 3, 2015.

The Act’s definition of credit history includes:

• Credit scores;
• Credit reports;
• Late or missed payments;
• Charged-off debts;
• Bankruptcies or judgments; and
• Details about credit accounts.

Under the law, there are several exceptions where employers may utilize credit report information for hiring and employment decisions.  These exceptions include:

• Employment where credit information is required under state or federal law;
• Employment for law enforcement positions;
• Positions that require extensive public trust and require background checks;
• Positions requiring state or federal security clearance;
• Positions with spending authority of $10,000 or more in assets; and
• Non-clerical positions with access to national intelligence or trade secrets.

This legislation is largely considered pro-employee and workers should keep it in mind when employers ask for their credit histories. If employees believe that they have been illegally discriminated against based on a credit history issue, they can file a complaint with the New York Commission on Human Rights or file suit against the employer, which can lead to the payment of compensatory damages.

One of our attorneys, Philip Gordon has testified before the House and Senate’s Joint Committee on Labor and Workforce Development in favor of similar laws here in Massachusetts.

If you have any questions about this legislation or if you have faced credit or background checks in your employment, contact us today.