On May 6, New York City Mayor Bill de Blasio signed into law Intro 261-A, known as the Stop Credit Discrimination in Employment Act (SCDEA). The law bans most New York City employers from running credit checks for hiring, promotion, and job-retention decisions. On June 29, Mayor de Blasio also signed into law Intro 318-A, known as the Fair Chance Act (FCA), which will strictly regulate how employers in the city conduct criminal background checks.
Ban on Credit Checks
Touted as the strongest credit check law in the nation, the SCDEA prohibits employers from requesting or using an employee’s or job applicant’s consumer credit history when making hiring, promotion, and job-retention decisions. The SCDEA will go into effect on September 3, 2015.
The SCDEA defines “consumer credit history” to include:
Consumer reports;
Credit scores; and
Other information an employer obtains directly from an applicant or employee regarding:
Details about credit accounts; or
Bankruptcies, judgments, or liens.
The new law provides exemptions if a credit inquiry is required by state or federal law or the rules of a financial self-regulatory organization. Additional exemptions apply for employees who hold sensitive positions, including police and peace officers; nonclerical positions with regular access to trade secrets, intelligence, and national security information; and employees with signatory authority over or a fiduciary duty to funds and assets valued at $10,000 or more.
Ban on Criminal Background Checks
The FCA is a “ban-the-box” law that will prohibit New York City employers from inquiring about an applicant’s pending arrests or criminal convictions. The law will prohibit employers from conducting criminal background checks until after they have extended “a conditional offer of employment” to an applicant. The FCA will go into effect on October 27, 2015.
Criminal background checks include “any searches of publicly available records or consumer reports that are conducted for the purpose of obtaining an applicant’s criminal background information.” The bill will require employers to make certain disclosures and follow certain protocols before withdrawing a conditional offer of employment based on the results of a criminal background check, including:
A written copy of the criminal background check results must be provided to the applicant.
The employer must perform an analysis to determine whether there are lawful grounds to deny employment based on a criminal conviction.
A written copy of the employer’s analysis must be provided to the applicant.
The applicant must be given three business days after receiving the analysis to respond.
The FCA will not affect employers’ ability to conduct criminal background checks as required by federal or state law.
What New York Employers Need to Know
With the signing of the SCDEA and the FCA, New York City joins a growing list of jurisdictions that have restricted employers from inquiring about applicants’ and employees’ credit and criminal histories. New York City is the latest city in New York state to adopt a ban-the-box law.
Under both laws, complaints would be filed with the New York City Commission on Human Rights or directly in court. As many employers know, the commission is not employer-friendly. Employers that inquire into applicants’ and employees’ criminal background may also be required to comply with New York Correction Law Article 23-A and the federal Fair Credit Reporting Act (FCRA). If that’s not enough, the Equal Employment Opportunity Commission (EEOC) is using one employer’s criminal background check practice as a basis to pursue charges of race discrimination in hiring on the belief that persons of color are disparately affected by such checks.
Given the stakes, employers in the city are encouraged to review their hiring policies and practices with counsel and modify any practices that could violate the FCA or the SCDEA. Employers should refrain from asking about an applicant’s credit history and performing criminal background checks until they are prepared to make a conditional offer of employment. If an applicant’s criminal conviction is discovered and a conditional offer of employment is withdrawn because of the conviction, the employer must be able to show it performed a sophisticated analysis that will withstand judicial scrutiny. Consult with qualified legal counsel on how to navigate these new challenges.
Edward O. Sweeney and Kate Roberts
We hope this information is valuable to you. If you have any questions, please do not hesitate to contact Holman HR.