New York City Credit Check Law for Employees

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New York City is one of several cities across the country that prohibits employment-related credit checks. The Stop Credit Discrimination in Employment Act (SCDEA) makes it illegal for employees to use or request the consumer credit check of a job applicant or employee to make employment decisions. As a result, it’s illegal for an employer or potential employer to make employment decisions based on your credit history.

Have you been fired, demoted, or denied a job based on your credit history in New York City? If so, you may be entitled to compensation by filing a claim with the NYC Commission on Human Rights. At Lipsky Lowe LLP, we hold New York City employers accountable when they discriminate against employees based on their credit history. Contact us today to schedule your initial consultation and learn how we will advocate for your right to compensation.

New York City Employers Cannot Run a Credit History Check

New York City joined California, Hawaii, Illinois, Washington, and other states in prohibiting credit reports in employment in 2015. The Stop Credit Discrimination in Employment Act (SCDEA) amended the New York City Human Rights Law to prohibit employer credit checks in certain situations. Employers cannot request or use a job applicant or employee’s consumer credit history and use that information to make employment decisions, such as:

  • Hiring
  • Compensation
  • Promotions
  • Benefits
  • Any other terms and conditions of employment

Common Violations of the SCDEA

According to the SCDEA, the following actions are considered separate, chargeable violations of the law in New York City:

  • Requesting consumer credit history from job applicants or potential or current employees, either orally or in writing;
  • Using consumer credit history in an employment decision or when considering an employment action, and
  • Requesting or obtaining the consumer credit history of a job applicant or potential or current employee from a consumer reporting agency

Even if the actions listed above don’t lead to an adverse employment action, they are still considered unlawful discriminatory practices. For example, suppose a job applicant applies for a job as an insurance adjuster. The employer requests a consumer credit history from the job applicant on the phone. The employer receives the credit history and hires the employee for the job. 

Although the employer didn’t refuse to hire the applicant based on his or her consumer credit check, the employer’s request for the credit history is enough to constitute a violation of the SCDEA. However, whether or not the employer took an adverse employment action against the employer can be considered when determining penalties and damages. 

The Stop Discrimination in Employment Act also makes it an unlawful discriminatory practice for a New York City agency to request or use information pertaining to an individual’s consumer credit history for the purposes of licensing or permitting. 

The Definition of Consumer Credit Report

An employer may try to avoid SCDEA liability by claiming they didn’t specifically request a consumer credit report. However, the definition of a consumer credit report is fairly broad. The SCDEA defines a consumer credit report as “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.” A consumer reporting agency is also defined broadly and can include companies that provide reports containing the following information:

  • Information about consumer’s payment history to creditors
  • The amount of a consumer’s credit and credit consumption
  • Information from debt buyers and collectors

Any person or business that engages in the practice of assembling or evaluating consumer credit information for monetary fees, dues, or on a cooperative nonprofit basis is considered a consumer credit reporting agency. Unlike the New York State Fair Credit Reporting Act (“FCRA”), the SCDEA doesn’t require a person or entity to regularly engage in assembling or evaluating consumer credit histories to be considered a consumer reporting agency. 

The SCDEA Is Intended to Protect Applicants and Employees from Discrimination

The SCDEA is intended to prohibit New York City employers from using an applicant or current employee’s consumer credit history to discriminate against him or her. The law reflects the City’s viewpoint that consumer credit history is rarely relevant to making employment decisions. Consumer reports shouldn’t be requested for individuals seeking most positions in New York City. The New York City Council stated they intended for the law to be “the strongest bill of its type in the country prohibiting discriminatory employment credit checks.”

How Do Employers Try to Get Around the SCDEA?

Some employers have tried to get around this prohibition by hiring another company to perform a credit check on employees or potential employees. Hiring a third-party company to run a credit history check is also prohibited by the NYC Commission on Human Rights. Additionally, even if an employer asks you to sign a document agreeing to a credit check, they are violating New York City employment law. Under no circumstances can employers use services, websites, or third-party companies to research an employee or potential employee’s credit history.

Employers should audit their hiring practices to ensure they’re in compliance with all local, state, and federal credit reporting laws. Unfortunately, many New York City employers still haven’t updated their hiring practices in light of the SCDEA becoming law. Claiming ignorance of the law isn’t enough to avoid liability. Even when an employer wasn’t aware of the illegality of requesting a consumer credit report, the applicant or employee still has a right to file a claim against the employer in court. 

Employers Cannot Ask About Your Credit Score

Your employer may try to ask you about your credit history. An employer may try to bring the topic up in a casual conversation. You are not required to answer these questions. Even if you answer questions about your credit history voluntarily, you can still bring a claim against your employer or potential employer. When employers ask questions about the following type of credit history issues, they are violating New York City law:

  • Credit history
  • Previous bankruptcies
  • Credit standing
  • How much credit you have
  • Child support obligations
  • Credit card debt
  • Foreclosures
  • Student loan debt
  • Missed or late payments
  • Judgments
  • Bankruptcies
  • Liens 

Exceptions to the Prohibition Against Employment Credit Check

The New York City Council intended the provisions of the SCDEA to be broad and to apply to most New York City employers. However, there are some exceptions to the general rule that employers cannot request consumer credit checks. 

There are eight exceptions to the prohibition against employers using an employee’s credit history to make decisions. The SCDEA provides the following eight exemptions:

  1. Employers required by state or federal law, or the Financial Industry Regulatory Authority (“FINRA”) to use a person’s consumer credit history for employment purposes
  2. Peace officers, police officer, or positions with an investigative or law enforcement function at the Department of Investigation (“DOI”)
  3. Positions that require a DOI background investigation
  4. Positions that require bonding under city, state, or federal laws or regulations
  5. State or federal-level positions that require a security clearance
  6. Non-clerical positions that involve access to intelligence, information, trade secrets, or national security information
  7. Positions that include responsibility for assets or funds worth $10,000 or more
  8. Positions involving digital security systems

Proving an Exemption Applies

The New York City Human Rights Commission made it clear that these exceptions should be narrowly construed. Additionally, these exemptions don’t apply to an entire industry or type of employer. 

Instead, they apply to employment positions or roles, not individual applicants or employees. The burden of proving that an exemption exists is on the business, not the employee filing the claim. Employers, not job applicants or employees, have the burden to prove that no exemption applies to them. When employers claim an exemption to defend themselves against liability, they must prove by a preponderance of the evidence that the exemption is applicable. 

When an employer claims an exemption, it must show that the position or role falls within one of the eight exemptions listed above. They must inform an applicant or employee that they are exempted from adhering to the SCDEA. Additionally, employers must keep a record of their use of the exemption for at least five years. The exemption log must contain specific information, including the job duties of the exempted position and the qualifications necessary to perform the exempted position. 

Does the NYC Human Rights Law Protect Me?

Most NYC employees are covered by the NYC Human Rights Law, even when they are part-time employees. Employers with four or more employees must abide by the NYC Human Rights Law. Individual business owners are counted toward this number. The four employees don’t have to all work in New York City for this law to apply. 

Interns, most independent contractors, domestic workers, undocumented workers, and probationary employees are not protected under this law. If you aren’t sure whether your employer or potential employer is bound by the law, the employment lawyers at Lipsky Lowe LLP can advise you of your rights. The NYC Human Rights Law typically protects employees in the following job positions:

  • Salespeople
  • Clerical staff
  • Administrative staff
  • Restaurant servers
  • Bartenders 
  • Bank tellers
  • Movers
  • Fast-food workers

Which Agency Enforces the Civil Rights Restoration Act?

The New York City Commission on Human Rights is the agency responsible for enforcing the New York City Human Rights Law and the Stop Credit Discrimination in Employment Act. Employees who would like to pursue a claim under this law can choose to submit a complaint with the Commission’s Law Enforcement Bureau within one year of the discriminatory act occurring. Alternatively, they can file a complaint with the New York State Supreme Court within three years of the discriminatory Act.

What Damages Am I Entitled to Under the NYC Human Rights Law?

Many employers claim that they weren’t aware that they couldn’t run credit checks on employees. This excuse isn’t enough to prevent them from paying fines and penalties. The Commission takes the SCDEA’s prohibition against asking about or using consumer credit history seriously. The Commission has the legal authority to impose penalties of up to $135,000 for violations of the Human Rights Law. 

The severity of the penalties depends on the severity of the employer’s conduct. When the violation is willful, wanton, or malicious, the Commission can fine the business up to $250,000. When determining the penalty amount, the Commission will consider the following factors, among others:

  • The employer’s actual or constructive knowledge of the SCDEA
  • The employer’s size, including total employees and revenue 
  • WHether the employer had previously violated the SCDEA
  • The severity of the violation

In addition to requiring the employer to pay fines, the Commission can authorize other types of remedies to be paid to successful claimants. Specifically, employees who file claims are entitled to the following types of remedies:

  • Back and front pay
  • Compensatory damages
  • Punitive damages in some cases
  • Attorneys’ fees and costs

Contact an NYC Credit History Lawyer Today

In these challenging economic times, many New York residents need to rely on credit to make it through the month. Using credit should not be a reason an otherwise qualified employee is denied an employment position. Thankfully, the SCDEA provides New York City employees with broad protections from submitting to consumer credit checks. State and federal laws provide employees throughout New York with additional legal protections.

If you believe that an employer unlawfully denied you employment because of your credit report, you may have a right to pursue legal action. You may be entitled to back and front pay, attorney fees, and compensatory damages. The sooner you discuss your claim with a skilled New York City employment lawyer, the better. You only have a limited amount of time to file a claim for compensation. Contact the experienced employment lawyers at Lipsky Lowe LLP to schedule your initial consultation.