By Michael Arnold
Last week, the Stop Credit Discrimination in
Employment Act became
effective. It amended the New York City Human Rights Law to prohibit most
employers from making employment decisions based on an employee or applicant’s
consumer credit history. You can read the specifics here. The NYC Commission on Human Rights has now released enforcement guidance detailing its interpretation of this new law. Our immediate
takeaway: employers should attempt to utilize the law’s exemptions sparingly,
and when they do, they should document it sufficiently. We breakdown the
guidance below.
The Commission Interprets
the SCDEA Broadly
From the outset, the Commission makes it clear that it is required to
interpret the law broadly, because (i) the City Council wanted the SCDEA to be
the strongest anti-credit discrimination law in the nation, and (ii) the Human
Right Law requires that its provisions be construed liberally. In all:
the Commission takes the view, consistent with City Council findings, that
consumer credit history should not factor into employment decisions related to
most positions in the City.
Thus, Not
Surprisingly, the Commission Interprets the SCDEA’s Exemptions Narrowly
The Commission stated that employers should construe the SCDEA’s exemptions
narrowly, and that the burden rests with the employer to prove by a
preponderance of the evidence the exemption’s application. We focus on four of
the SCDEA’s exemptions below.
1. Positions where state or federal law or regulations or
where the regulations of a self-regulatory organization require the employer to
use consumer credit history for employment purposes
The Commission confirmed that the SCDEA does not apply to
individuals required to register with FINRA. This does not mean however,
that employers who are FINRA members are wholly exempted as many of their
employees may not be
required to register with FINRA. The Commission further noted that, to
its knowledge, the only New York State law that would satisfy this exemption
related to licensed mortgage loan originators.
2. Non-clerical positions having regular access to trade
secrets
The Commission stated that “trade secrets” does not include
regular access to information such as “recipes, formulas, customer lists,
processes, and other information regularly collected in the course of business
or regularly used by entry-level and non-salaried employees and supervisors or
managers or such employees. In other words, think twice before applying
this exemption even if the individual will have access to certain sensitive
information.
3. Positions involving responsibility for funds or assets
worth $10,000 or more
The Commission stated that this exemption only applies
to executive-level positions with financial control over the Company, including but not
limited to, CFOs and COOs, and it does not include all
staff in the finance department.
4.
Positions involving digital security
systems
Likewise, this exemption, the Commission said, only
applies to executive-level positions, such as a CTO, or other information technology executives
who control access to all parts of a company’s computer system. It does
not include any person who may access a computer system or network available to
employees, or all staff in an IT department.
The Commission
Wants You to Document any Claimed Exemption
Although not required by the SCDEA, the Commission is advising employers to
inform the applicant or employee any time it seeks to apply an exemption.
The Commission also wants employers to create and maintain an exemption log
that identifies the following information:
1. The claimed exemption;
2. Why the claimed exemption covers the exempted
position;
3. The name and contact information of all
applicants or employees considered for the exempted position;
4. The job duties of the exempted position;
5. The qualifications necessary to perform the
exempted position;
6. A copy of the applicant’s or employee’s credit
history that was obtained pursuant to the claimed exemption;
7. How the credit history was obtained; and
8. How the credit history led to the employment
action.
The Commission says an entry should remain on the log for at least five
years, and that it may require employers to share their exemption log with the
Commission upon request. Again, while this is not statutorily-required,
the Commission kindly notes that following this guidance could help an employer
“avoid a Commission-initiated investigation into employment practices.”
A Violation May
Occur Even Without an Adverse Employment Action
The Commission made it clear that employers may violate the law simply by
requesting consumer credit history even if they don’t otherwise act on
it. The Commission said that liability will ensue from such a request,
and the question over whether it led to any adverse employment action (i.e. a
rejection of the applicant) would only factor into any damage or penalty determination.
Further, the Commission did make it clear that a credit history request does
not preclude an employer from researching a candidate or employee’s background
or experience, evaluating their resume and references and conducting online
searches (e.g., via Google or LinkedIn).
The Commission
Says it Will Take Violations Seriously
Consistent with the NYC Human Rights Law’s penalty provision, the
Commission stated that it “will impose” civil penalties of up to $125,000 for
violations, or up to $250,000 where those violations are the result of willful,
wanton or malicious conduct. It said that the ultimately penalty amount
would be determined based upon several factors, including (i) the severity of
the violation; (ii) the existence of subsequent violations; (iii) the
employer’s size, considering both the total number of employees and its
revenue; and (iv) the employer’s actual or constructive knowledge of the
SCDEA. Of course, other damages are available as well, including back and
front pay and compensatory and punitive damages.
Takeaways
The Stop Credit Discrimination in Employment Act is the result of a City
Council finding that consumer credit history is rarely relevant when making an
employment decision, and therefore, employers should be restricted from
requesting such information except in very limited circumstances. The
Commission has also adopted this view in its enforcement guidance. Thus,
now that the law is in effect, City employers should be careful before making a
credit history request for job applicants and current employees. They
should closely examine whether the individual can meet one of the exemptions
and if they decide to apply the exemption, they should strongly consider
following the Commissions documentation guidelines. Employers should also
remain aware of the separate disclosure and authorization requirements under
the New York State and Federal Fair Credit Reports Acts.
No comments:
Post a Comment