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Earlier in 2015, the New York City Council passed the Fair Chance Act (FCA) and the Stop Credit in Employment Discrimination Act (SCDEA). The FCA is a “ban the box” law, and it prohibits employers from asking about a job applicant’s criminal history and conducting a criminal background check until after extending the conditional offer. Additionally, if the offer is withdrawn, the reason must be explained in writing and hold the position open for three business days in order to allow the applicant time to respond. The Fair Chance Act will become effective on October 27, 2015. (For additional details, see Corporate Screening’s June 15, 2015 Client Alert, and Seyfarth Shaw’s blog post.)

The SCDEA prohibits employers from using an applicant’s consumer credit history when making employment decisions, and went into effect on September 3, 2015 and applies to New York City employers of four or more persons. Attorneys at Seyfarth Shaw related that the New York law is “broader – and provides fewer exceptions – than other jurisdiction, which, by way of example, provide exceptions for managerial positions, financial institutions, or positions where the credit report is substantially related to the job. Not only does the bill make it unlawful for employers to use an applicant’s credit history when making employment decisions, but it also makes it unlawful for employers to request credit history for employment purposes, unless an exception is met.  The bill’s protections also extend beyond the hiring process and apply to current employees; the bill prohibits employers from considering consumer credit history broadly with regard to “compensation, or the terms, conditions or privileges of employment.” (Additional details are also provided on Corporate Screening’s April 20, 2015 Client Alert.)

On September 28, the New York City Commission on Human Rights (NYCCHR) staff attorney, Paul Keefe, held a question and answer forum about how the NYCCHR will interpret and apply these two laws. Seyfarth Shaw shared information about this in a recent client alert.

The following information relayed in this session has been provided by Seyfarth Shaw and applies to the Stop Credit Discrimination in Employment Act:

  • The “FINRA Exception,” detailed in the NYCCHR’s guidance is broader than indicated by the guidance.  The guidance states that individuals required to register with FINRA are exempt from the SCDEA, referencing by footnote FINRA Rule 1230.  However, FINRA Rule 1230 does not encompass all employees required to register with FINRA.  The NYCCHR clarified that the intent is to exempt all positions required to register with FINRA, and further, to cover individuals required to register with similar self-regulatory organizations, such as the National Futures Association.
  • Likewise, the exception for “positions that allow the employee to modify digital security systems protecting the employer or client’s networks or databases” is broader than previously suggested.  For instance, the guidance suggests that this exemption is narrow and will only cover “Chief Technology Officers” or “senior information technology executives.” However, larger employers with additional positions that do not have a CTO or executive title but are able to modify the digital security systems would likewise be able to conduct credit checks on those employees.
  • Should an exemption apply, employers are required to maintain an exemption log for five years, detailing (1) the claimed exemption; (2) why the claimed exemption covers the exempted position; (3) the name and contact information of all applicants considered for the position; (4) the job duties of the exempted position; (5) the qualifications necessary to perform the exempted position; (6) a copy of the applicants’ credit history that was obtained; (7) how the credit history was obtained; and (8) how the credit history led to the employment decision.  It will be the employer’s burden to prove the exemption was properly applied through this documentation.
  • Finally, and perhaps most significantly, the NYCCHR clarified that the “intent of the law” is to avoid reference to credit checks at any point in the application process, and even after a conditional offer is provided, unless an exemption is met.  Consequently, the NYCCHR will take a strict interpretation of the statute, and clarified that it would likely view FCRA Disclosure and/or Acknowledgment forms referencing credit history as noncompliant with the law, even if the employer does not ultimately obtain the applicant’s consumer credit report.  This is not referenced anywhere in the statute or the guidance.
  • The NYCCHR expects to answer additional questions related to financial employers through Frequently Asked Questions on its website.  For instance, we expect the NYCCHR to weigh in on how to reconcile the SCDEA with financial institutions’ obligations under the SEC to monitor and ensure compliance with its insider trading policies. Likewise, the NYCCHR will weigh in on whether the “signatory exception” might apply to positions holding company credit cards with a limit in excess of $10,000.

 

And Seyfarth Shaw also provided clarifications from the NYCCHR regarding the Fair Chance Act, as follows:

  • The three business day time frame will run from the date the applicant receives his or her consumer report and the employer’s analysis.
  • The Commission will consider it to be a violation of the law should a job advertisement or application reference, even generally, that a criminal background check will be conducted — even if the advertisement or application refrains from stating any blanket prohibitions such as “no felonies.”  However, advertisements that state “reference checks will be conducted” would be considered lawful.
  • It is still permissible to use reference checks and public resources, as long the intent of the check is not to discover an applicant’s credit score or criminal background. Thus, simply searching an “applicant’s name” in Google or LinkedIn would be permissible, however, searching “[Applicant’s Name] criminal background” would be impermissible.
  • Should an applicant inquire about a criminal background check during the interview process, the proper response to the applicant is simply that the Company will decide whether to conduct a background check after a conditional offer.
  • The employer does not lose its right to take adverse action against an applicant who misrepresents his or her criminal history, so long as it does not ask the applicant about criminal history until after a conditional offer of employment is given.
  • Temporary staffing agencies need not conduct the Article 23-A analysis for each temporary position — only when making the initial decision to place the applicant in its pool of available temporary employees.  However, staffing agencies are not permitted to accommodate client requests for “no felons,” or other preferences with respect to criminal background, unless that limitation is required by state or federal law, and doing so may result in aiding and abetting liability under the statute.

In addition, Seyfarth Shaw shared that the NYCCHR will offer training at no cost for small businesses on how to comply with these new laws. And employers will be able to provide input about the practical impact of the new laws early in 2016, when the rulemaking and notice and comment period begin.