United States: New Legislation Limits NYC Employers' Use Of Credit And Criminal History

The New York City Council recently passed two pieces of legislation that will change the way many employers conduct and use background checks with respect to applicants and employees. First, the City Council approved a bill amending the New York City Human Rights Law, NYC Administrative Code, § 8-101 et seq. ("NYCHRL") to prohibit most employers from making employment decisions based on an applicant's or employee's consumer credit history. The law went into effect on September 3, 2015. Second, the Council passed a bill to amend the NYCHRL to further limit employers from inquiring into or considering an applicant's or employee's criminal history in employment decisions. This law went into effect on October 27, 2015.

Credit History Discrimination Ban

On April 16, 2015, the NYC Council passed the "Stop Credit Discrimination in Employment Act" by a vote of 47-3, and on May 6, 2015, the Mayor signed that bill into law. The law adds a new provision to the NYCHRL making it an "unlawful discriminatory practice" for employers to request or use for employment purposes the consumer credit history of an applicant or employee, except in limited circumstances, such as:

  • When required by state or federal law or regulations;
  • When required by a self-regulatory organization as defined by the Securities Exchange Act of 1934. The term "self-regulatory organization" means any national securities exchange, registered securities association, or registered clearing agency, such as FINRA. Broker-dealer firms subject to FINRA's regulatory authority may request certain credit check information from registered job applicants under FINRA Rule 3110(e), which became effective on July 1, 2015. That rule requires FINRA members to verify information provided on the applicant's Form U-4, such as disclosures about bankruptcies and outstanding judgments or liens;
  • For employment as a police officer or certain positions with the New York City Department of Investigation;
  • For positions in which an employee is required to be bonded under city, state or federal law;
  • For positions in which an employee is required to possess security clearance under federal or state law;
  • For nonclerical positions having regular access to "trade secrets" (which is defined under the law and specifically excludes client, customer or mailing lists);
  • For positions that have signing authority over third-party funds or assets of $10,000 or more or that involve fiduciary responsibility to the employer with authority to enter financial agreements on behalf of the employer for amounts of $10,000 or more; or
  • For computer security positions where the regular duties allow the employee to modify digital security systems established to prevent the unauthorized use of an employer's or client's networks or databases.

In addition, employers may request or receive consumer credit history information pursuant to subpoena, court order or law enforcement investigation.

On September 1, 2015, the New York City Commission on Human Rights ("NYC Commission"), the city agency charged with enforcing the law, published on its website Legal Enforcement Guidelines concerning the new law. In addition, the NYC Commission published separate fact sheets for employees and employers, aimed at providing basic information about the law. The Guidelines confirm that the NYC Commission views credit checks as "rarely relevant to employment positions." Importantly, the Guidelines state that "all exemptions to coverage under the [law's] anti-discrimination provisions are to be construed narrowly" and that employers who claim an exemption as a defense to liability have the burden of proving the exemption by a preponderance of the evidence.

The NYC Commission further recommends (but does not require) that employers wishing to avail themselves of an exemption inform the applicant or employee of the claimed exemption and keep a log of all exemptions utilized for five years from the date the exemption is used. The log should include details regarding (i) the exemption claimed; (ii) why the exemption is applicable; (iii) the name and contact information for all individuals considered for the exempted position; (iv) the job duties of the position; (v) the qualifications necessary to perform the position; (vi) a copy of credit history obtained for the individual for whom the exemption was claimed; (vii) how the credit history was obtained; and (viii) how the credit history resulted in the employment action taken. Employers are required to provide the above information to the Commission upon request.

Finally, the Guidelines remind employers that there are substantial penalties for violations of the law (up to $250,000 for willful, wanton, or malicious violations, and up to $125,000 for other violations) in addition to other remedies available under the NYCHRL.

"Ban the Box" Legislation

On June 10, 2015, by a 45-5 vote, the New York City Council passed a bill called the "Fair Chance Act," which puts significant restrictions on employers' ability to request or use criminal history in hiring and other personnel decisions. Mayor de Blasio signed the bill into law on June 29, 2015 and it went into effect on October 27, 2015.

Even before the Fair Chance Act was enacted, under New York State and City law, employers could not ask about or take adverse action based upon any arrest or criminal accusation of an employee or candidate not then pending against that person which was followed by a termination of that criminal action or proceeding in favor of such person — that is, an accusation or arrest that resulted in acquittal or dismissal of charges may not be the subject of an inquiry or the basis for taking an adverse action. In addition, before denying employment based on an individual's conviction record, the law requires employers to consider multiple factors, listed in Article 23-A of the New York State Correction Law, to determine whether (a) there is a direct relationship between the criminal offense and the employment sought or held by the individual, or (b) employing the individual would involve an "unreasonable risk to property or to the safety or welfare of specific individuals or the general public."

The Fair Chance Act prohibits employers from asking about criminal history at any time prior to extending a conditional offer of employment, such as in an initial employment application or interview or otherwise (referenced commonly as a "ban the box" provision). In addition, the law bars employers from stating on any job advertisement or publication that employment is dependent on an applicant's arrest or conviction history. Before taking any adverse action on the basis of criminal history, the law requires employers to:

  • Provide a written copy of the criminal history inquiry to the applicant;
  • Provide an Article 23-A analysis to the applicant in writing, which must include "supporting documents" that formed the basis of and reasons for the adverse action; and
  • After providing the applicant with all of the required documentation, allow the individual at least three business days to respond and, during that time, hold the position open for the applicant.

The NYC Commission has prepared a Fair Chance Notice, available on its website, that employers may use to comply with the requirement. The Commission has stated that the form may be adapted to an employer's preferred format, as long as the material substance does not change.

Finally, the law does not apply to any actions taken by an employer pursuant to any federal, state, or local law requiring criminal background checks for employment purposes or barring employment based on criminal history. For this purpose, "federal law" includes the rules or regulations of a self-regulatory organization as defined by the Securities Exchange Act of 1934 (such as FINRA). Employers in the financial services industry, to the extent they must assess whether employees are subject to statutory disqualification due to certain criminal convictions, will be exempt from the requirements of the law. Further, to the extent employers must comply with FINRA Rule 3110(e), which requires member firms to conduct background investigations of applicants for FINRA registration, the law does not apply to such actions. The law also appears to exempt banking institutions subject to the Federal Deposit Insurance Act, which prohibits the employment of individuals convicted of certain offenses without FDIC consent and requires covered employers to inquire into a job applicant's conviction record. The law also provides exceptions for certain public positions.

The Commission has also published on its website Legal Enforcement Guidelines concerning the Fair Chance Act. The Guidelines confirm the goal of the new law: to "ensure[] that individuals with criminal histories are considered based on their qualifications before their conviction histories" and states that "[i]f the employer wishes to nevertheless withdraw its offer it must first give the applicant a meaningful opportunity to respond before finalizing its decision." The Guidelines provide the following suggested language for employers that wish to inquire about criminal histories after a conditional offer is made:

Have you ever been convicted of a misdemeanor or a felony? Answer "NO" if your conviction: (a) was sealed, expunged or reversed on appeal; (b) was for a violation, infraction or petty offense such as "disorderly conduct;" (c) resulted in a youthful offender or juvenile delinquency finding; or (d) if you withdrew your plea after completing a court program and were not convicted of a misdemeanor or felony.

The Guidelines also provide specific suggestions concerning the proper methods of evaluating the applicant using the Article 23-A factors, providing the applicant an opportunity to respond to the employer's inquiry and written notice, and addressing background report errors or misrepresentations with applicants.

Like the credit history law, exemptions to coverage under the Fair Chance Act will be construed narrowly, and employers that assert an exemption will have the burden of proving the exemption by the preponderance of the evidence. Here too, the Commission suggests, but does not require, that employers maintain an "exemption log" so that they may promptly respond to inquiries by the Commission. The suggested log should contain (1) the exemption that is claimed; (2) how the position fits into the exemption and, if applicable, the law or rule allowing the exemption; (3) a copy of the inquiry and the name of the employee who made it; (4) a copy of the Article 23-A analysis and the names of any employers that participated in it; and (5) the final employment action that was taken based on the applicant's criminal history.

Importantly, the Guidelines also contain the Commission's recommendation that the results of any criminal history inquiry be collected and maintained on separate forms and kept confidential so that they are used only by those involved in making an employment decision.

With regard to enforcement of the law, the Commission has stated that it will presume, unless rebutted, that an employer was motivated by an applicant's criminal history records if it revokes a conditional offer of employment. In addition, the Commission will presume that "any reason known to the employer before its conditional offer is not a legitimate reason to later withdraw the offer" — that is, if an employer makes a conditional offer of employment after learning negative information regarding an applicant, it almost certainly would not be able to withdraw the offer based upon that same information.

Violation of the new laws could expose employers to potential damages and penalties available under the NYCHRL, including punitive damages and attorney's fees. Employers should review and revise their background check policies and practices to comply with the new laws. In particular, many employment applications include questions about past convictions — a practice that will be prohibited once the new law goes into effect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Seyfarth Shaw LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Seyfarth Shaw LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions