NYC Commission issues legal enforcement guidance on employment credit checks

The New York City Commission recently issued interpretive legal enforcement guidance clarifying some of the exemptions in the City’s Stop Credit Discrimination in Employment Act (“SCDEA”), as well as recordkeeping requirements and penalties.

As we reported previously, effective September 3, 2015, the SCDEA amends the New York City Human Rights Law (the “NYCHRL”) to make requesting and using consumer credit history for hiring and other employment purposes, with certain exceptions, an unlawful discriminatory practice.

The SCDEA defines “consumer credit history” as an individual’s “credit worthiness, credit standing, credit capacity, or payment history, as indicated by: (a) a consumer credit report; (b) credit score; or (c) information an employer obtains directly from the individual regarding details about (1) credit accounts, including the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, prior credit report inquiries, or (2) bankruptcies, judgments or liens.”

It remains unclear whether the law bans only inquiries, but not public record searches, for bankruptcies, judgments or liens. Under the SCDEA, a consumer credit report includes “any written or other communication of any information by a consumer reporting agency that bears on a consumer’s creditworthiness, credit standing, credit capacity or credit history,” and given the broad scope of “any  written or other communication of any information by a consumer reporting agency” caution should be taken regarding these searches and even for civil litigation, as such public records may reveal credit-related information that New York City employers are prohibited from using.

While the SCDEA generally establishes eight categories of exemptions, such as those of individuals required to be bonded under city, state, or federal law which are self-explanatory, there has been much speculation as to the scope of others. In its FAQs, the guidance specifically provides that the exemptions do not cover most low-level employees including, but not limited to, bank tellers, cashiers, salespeople, clerical workers, administrative staff, restaurant/bar workers, and private security employees.

Interpretation about non-clerical positions having regular access to trade secrets is also included in the guidance. The SCDEA defines “trade secrets” as “information that: (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means, by other persons who can obtain economic value from its disclosure or use; (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; and (c) can reasonably be said to be the end product of significant innovation.”

The SCDEA limits the trade secret definition to exclude “general proprietary company information such as handbooks and policies” and “access to or the use of client, customer, or mailing lists.” Consistent with this definition and the broad scope of the NYCHRL, “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 guidance emphasizes that all exemptions to coverage under the SCDEA’s anti-discrimination provisions are to be construed narrowly. Employers may claim an exemption to defend against liability, but they have the burden of proving the exemption by a preponderance of the evidence. No exemption applies to an entire employer or industry–exemptions apply only to positions or roles, and not to individual applicants or employees. The law does permits employers to request credit information in response to any lawful subpoena, court order, or law enforcement investigation.

An employer claiming an exemption must show that the position or role falls under one of the eight  general position categories referenced previously. Employers availing themselves of the exemptions should inform applicants or employees of the claimed exemption, and should also keep a record of their use of such exemptions for a period of five years from the date an exemption is used. Keeping an exemption log will help the employer respond to the Commission’s requests for information.

The guidance sets forth civil penalties for violations of the law (up to $250,000 for willful, wanton, or malicious violations, and up to $125,000 for other violations) in addition to other remedies available under the NYCHRL.

Read the SCDEA, N.Y.C. Admin. Code §§ 8-102(29), 8-107(9)(d), (24); Local Law No. 37 (2015)

Access the interpretive guidance, FAQs and other information about the credit check law here.