New York City’s credit discrimination law (New Credit Law) becomes effective September 3, 2015. The New Credit Law, which modifies New York City’s Human Rights Law, prohibits employers with four or more employees in New York City (including individuals employed as independent contractors who are not themselves employers) from using an applicant’s or an employee’s consumer credit history in making employment decisions.
The New Credit Law expansively defines "consumer credit history" as an employee’s or applicant’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; (1) details about 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."
The New Credit Law contains a limited number of exceptions. Employers will be permitted to request and use an applicant or employee’s consumer credit history only under the following circumstances:
- When required by state or federal law or regulations;
- When required by a "a self-regulatory organization as defined in section 3(a)(26) of the Securities Exchange Act of 1934" (FINRA);
- For employment as a police or peace officer, or those in a position with a law enforcement or investigative function;
- For positions that require background investigation by the "department of investigation for certain public trust positions;"
- For positions in which an employee is required to be bonded under City, state or federal law;
- For positions in which an employee is required by law to possess security clearance under state or federal law;
- For non-clerical positions having regular access to "trade secrets," intelligence information or national security information;
- For positions that have signing authority over third party funds or assets valued at $10,000 or more, or that involve fiduciary responsibility to the employer with authority to enter financial agreements on behalf of the employer valued at $10,000 or more; or
- For positions where the employee’s regular duties allow the employee to modify digital security systems in place to prevent the unauthorized use of the employer’s or client’s networks or databases.
The New Credit Law is considered much broader than laws banning credit checks for applicants and employees in other jurisdictions. In particular, the New Credit Law does not contain a general exemption for workers in the financial services industry.
Further, the definition of "trade secrets" under the New Credit Law differs from the common law definition of trade secrets used in New York case law. Specifically, the New Credit Law defines the term "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." Importantly, the New Credit Law adds that trade secrets do not include "general proprietary company information such as handbooks and policies," and the term "regular access to trade secrets" does not include "access to or the use of client, customer or mailing lists."
Employees and applicants who believe an employer violated the New Credit Law may bring a private suit or file a complaint with New York City’s Commission on Human Rights. As discrimination based on an individual’s credit history will now be treated the same as discrimination based on race, gender, religion, etc., employers who violate this law will be exposed to the full spectrum of damages available under New York City’s Human Rights Law, such as compensatory damages, punitive damages, injunctive relief, attorney’s fees and costs and civil and criminal penalties.
Effective September 3, 2015, companies with at least four employees in New York City should review their processes to insure that credit checks on applicants or employees are conducted in compliance with the New Credit Law.