On January 15, the NYC Coalition to Stop Credit Checks in Employment published an open letter to New York City Mayor de Blasio and the City Council, urging them to support legislation banning the use of credit checks in employment decisions. To the extent New York City enacts such a law, it would create yet another compliance obligation for multistate employers operating in an already crowded arena of local, state, and federal background check legislation. For example, employers using credit checks must currently comply with the Fair Credit Reporting Act’s requirements for disclosure and authorization. In addition, some states and localities already require an employer who desires to use a credit check in hiring to make a specific disclosure of the fact that credit checks are intended to be used.
According to the open letter, nearly half of U.S. employers conduct credit checks when hiring for some or all positions. Yet, the coalition urges, there is “no empirical evidence that reviewing personal credit history when hiring produces a more reliable, honest, or trustworthy workforce.” Instead, according to the coalition, the use of credit history disproportionately injures minorities such as African-Americans and Latinos, who are purportedly more likely to struggle with weak credit.
Because of the perceived inequity in using credit reports as a job screening tool, the coalition urges New York City’s leaders to join the growing list of states restricting the use of personal credit history in hiring. The coalition wants New York City, however, to go further than current state laws by restricting the use of credit checks in employment “without exemptions.” According to the open letter, while some states may have laws governing the use of credit checks, these laws have become watered down with exemptions that “allow discrimination to persist for some positions.” The coalition finds any such exemptions unacceptable.
Regardless of the action New York City ultimately takes with respect to the use of credit history, multistate employers must be conscious of the increasing number of local and state laws governing the use of credit checks. Because of these varied laws, a multistate employer can no longer feel comfortable that a “one-size-fits-all” hiring approach passes compliance muster.
Troutman Sanders has extensive experience guiding multistate employers through their compliance obligations with respect to pre-employment background checks.