Effective September 3, 2015, it became unlawful to conduct credit checks on nearly all potential and current employees if your business is located in the City of New York and you have more than four people on staff (including owners). As an employer, it is important to know the exceptions to this new limitation in the field of Human Resource Management.

What is actually prohibited?  According to the New York Commission on Human Rights (“NYCHR”), the governing body for this Ordinance, an employer cannot obtain a consumer credit report and use it in the hiring process unless the position falls within a specific list of exceptions.  According to the NYCHR, a consumer credit report refers to a credit score, credit accounts, bankruptcies, judgments, or liens whether obtained from a third party source or from the prospective employee directly.

While the Ordinance is being promoted by the City as the most stringent of its kind in the U.S., it does have its exceptions.   The onus is upon the employer to document the exception used to obtain a credit check.  The exceptions include:

• Positions in which federal or state law requires credit background reports, such as FINRA licensed companies;
• Police Officers, peace officers, or positions with a law enforcement or investigative function at the Department of Investigation (“DOI”);
• Any positon subject to a DOI Background Investigation;
• Positions requiring bonding under federal, state, or city law or regulation;
• Positions requiring security clearance under federal or state law;
• Non-clerical positions having regular access to trade secrets, intelligence information, or national security information;
• Positions requiring responsibility for funds or assets worth $10,000 or more; and
• Positions involving digital security systems.

It is important to consult an attorney or HR Specialist when making hiring decisions to determine whether or not you are complying with this, and other local, state and federal laws.  Before you do so, here are few practice points to get you started:

• Research each position to determine if it fits within one of the exemptions—it may require you to develop a list of what is a trade secret or business intelligence that warrants extra HR security for that position and therefore, based on the assessment reached, exempts that hire from the Ordinance’s limitation;
• Research your industry online to determine if there are federal or state guidelines that require credit history verifications for your industry;
• Use Google and LinkedIn and other social media platforms when making your hiring decisions to the extent your state does not ban such research or prevent you from using protected activity found on these sites against the candidate (i.e. cannot use evidence of a person’s gender preference, marital status, age, etc. against them).
• Create a log to document the exemptions used and the factual basis for each exemption claimed; and

The NYCHR has issued an official Guidance about the application of the Ordinance (see https://www1.nyc.gov/assets/cchr/downloads/pdf/CreditHistory-InterpretiveGuide-LegalGuidance.pdf) and it is expected it will continue to update the public on this topic via its FAQ page (see https://www1.nyc.gov/site/cchr/media/credit-check-law-frequently-asked-questions.page)