Data Protection Report - Norton Rose Fulbright

On May 6, 2015, New York City became one of about a dozen jurisdictions that prohibit or restrict the use of consumer credit history in hiring and other employment-related applications. NYC joins California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington. There are exceptions, however, including for some jobs implicating cybersecurity concerns.

Law Intro. 261-A amends NYC’s Human Rights Law and — with exceptions — makes an employer’s use of an applicant’s or employee’s “consumer credit history” for employment purposes an unlawful discriminatory practice. The law prohibits discrimination against an applicant or employee in hiring, compensation, or the terms, conditions, or privileges of employment, based on the individual’s credit history. The bill’s prohibition applies to New York City employers, labor organizations, and employment agencies of four or more individuals.

The law defines “consumer credit history” expansively to include the information candidates and employees might provide directly to the employer. The term encompasses an individual’s credit worthiness, credit standing, credit capacity, or payment history, as this information is reflected by (a) a consumer credit report (generally, as the term is defined in the FCRA); (b) credit score; or (c) information an employer obtains directly from the individual. Within the statute’s scope is the information individuals provide directly to employers regarding their (a) credit accounts, including the number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, prior credit report inquiries; or (b) bankruptcies, judgments or liens.

The law sets out several exceptions to the prohibition on the use of consumer credit reports. Specifically, the prohibition does not apply to:

  • Positions requiring a high level of public trust, such as police officers or others in a position with a law enforcement or investigative function.
  • Employers required by state or federal law or regulations, or by a self-regulatory organization, to use an individual’s consumer credit history for employment purposes.
  • Positions involving regular access to trade secrets, intelligence information, or national security information; notably, the “trade secret” exception does not apply to access to general proprietary company information, such as handbooks and policies or client, customer, or mailing lists.
  • Positions in which the employee has signatory authority over third party funds or assets valued at $10,000 or more, or that involves a fiduciary responsibility to the employer with the authority to enter financial agreements valued at $10,000 or more on behalf of the employer.
  • Positions for which an employee is required to possess security clearance under federal law or the law of any state.

In a nod to the ever-present cybersecurity concerns, the law does not apply to positions where the employee has the ability or right to modify digital security systems established to prevent the unauthorized use of the employer’s or client’s networks or database.

The law provides for a private right of action, and plaintiffs may seek back pay, reinstatement or other equitable relief, compensatory and punitive damages, and attorneys’ fees and costs.

To assist in monitoring compliance by the city’s employers, the NYC Commission on Human Rights will request employers to provide information about their use of the statute’s exemptions, and will subsequently report back to the New York City Council on the results of the requests and feedback from employers.

Our take

The New York City law further limits a practice that was prevalent in the past, but has lost popularity after the EEOC (unsuccessfully) asserted that the use of credit reports in hiring and other employment contexts was discriminatory, and many states prohibited the practice.