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Prohibitions on Credit Checks and Pre-Employment Criminal Background Checks Soon to go Into Effect

The New York City Council recently passed two laws that significantly affect hiring practices of New York City employers.  On October 27, 2015, the Fair Chance Act ("FCA"), which prohibits pre-employment inquiries into an applicant's conviction or arrest history, will go into effect.  On September 3, 2015, the Stop Credit Discrimination in Employment Act ("SCDEA") will go into effect, barring employers from conducting credit checks on applicants under most circumstances.  A previous blog post discussing both laws when they were pending bills can be found here. 


Under the Fair Chance Act, an employer must extend a conditional job offer before asking about or searching public records or consumer reports for an applicant's arrest or conviction history.  If, after extending a conditional job offer, an employer decides to take an adverse employment action based on a criminal inquiry, before taking the adverse action, the employer must provide the applicant with a written copy of the criminal inquiry as well as a written analysis pursuant to New York Correctional Law Section 23A in a form to be determined by the Commission of Human Rights, which includes supporting documentation.  The applicant must have at least three business days to respond, during which time the position must remain open.  The FCA also prohibits employers from using job advertisements that limit who can apply based on a person's previous arrest or conviction history.

The FCA does not apply to those employers who are legally required to conduct a criminal history search or when hiring for certain positions such as police officers, peace officers or those working in law enforcement.  The FCA does allow for a private cause action, and it no longer includes a minimum of $1,000 in damages liability, which was included in the initial bill. 


The recently enacted Stop Credit Discrimination in Employment Act prohibits employers from requesting or using an applicant's or employee's "consumer credit history" in making employment decisions.  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 (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."  It also 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." 

The SCDEA has a limited number of exceptions that allow credit checks to be conducted on employees or applicants for certain positions, such as police officers, or where employers are required by law (including ยง  3(a)(26) of the Securities Exchange Act of 1934) to inquire into the individual's credit history.  One notable exception to the Act allows credit checks to be conducted on individuals applying for or employed in a position with authority over third party assets or funds valued at $10,000 or more, or who are authorized to enter into financial agreements valued at $10,000 or more.  Other exceptions under the Act allow credit checks for non-clerical positions with regular access to trade secrets, and for positions with regular duties that include modifying digital security systems established to protect the employer's networks or databases.  The SCDEA does not affect an employer's ability to conduct criminal background checks.   

Employers should review and revise their hiring policies and practices to ensure they are compliant with these two laws.

This post was authored by Matt Lampe, Emilie Hendee, and Sharon Cohen of Jones Day.  The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of Jones Day or the New York State Bar Association.


This page contains a single entry from the blog posted on August 10, 2015 7:26 PM.


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