Earlier this month, the New York City Commission on Human Rights provided enforcement guidance on the Stop Credit Discrimination in Employment Act (SCDEA).  The SCDEA took effect on September 3, 2015, and restricts employers from requesting or using applicants’ and employees’ credit history when making employment decisions.  The Commission referred to SCDEA as the “strongest bill of its type in the country prohibiting discriminatory employment credit checks.”  While SCDEA has certain exemptions, guidance from the Commission makes clear that it will interpret SCDEA’s restrictions broadly and its exemptions narrowly.   

An employer can violate SCDEA by requesting or using a consumer’s credit history in an employment decision.  Thus, merely requesting the credit history is a violation even if an employer does not ultimately use it to make an employment decision.  Therefore, before requesting an applicant or employee’s credit history, employers should make sure that an applicable exemption permits the employer to request or use the credit history. 

The Commission stated that employers “may claim an exemption to defend against liability, and have the burden of proving the exemption by a preponderance of evidence.”  Employers are also advised to keep a record of their use of such exemptions for a period of five years from the date the exemption is used.  The commission’s guidance provides eight pieces of information the exemption log should include.   

SCDEA recognizes eight exemptions, including employers required by state or federal law or regulation or by the Financial Industry Regulatory Authority (FINRA) to use an individual’s consumer credit history for employment purposes.  

There are additional exemptions for positions with control of funds or assets worth $10,000 or more, nonclerical positions with regular access to trade secrets, and positions with control over digital security systems.  SCDEA also includes an exemption for positions where credit checks are required by law or self-regulatory organization. 

Careful attention should be paid when determining whether an exemption applies.  For example, according to the Commission’s guidance, the exemption for positions involving responsibility for funds or assets worth $10,000 or more will only apply to “executive-level positions with financial control over a company, including, but not limited to, Chief Financial Officers and Chief Operations Officers.”  The exemption would not “include all staff in a finance department.”   

The exemption for positions with regular access to trade secrets does not include 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 nonsalaried employees and supervisors or managers of such employees.” 

Penalties for administrative actions can range from $125,000 to $250,000 for violations that are the result of willful, wanton, or malicious conduct.  In determining the amount of a violation, the Commission will consider: (1) the severity of the violation; (2) the existence of subsequent violations; (3) the employer’s size, considering both the total number of employees and its revenue; and (4) the employer’s actual or constructive knowledge of the SCDEA.  These penalties are in addition to the other remedies available to individuals who prevail on claims under NYCHRL, including, but not limited to, “back and front pay, along with compensatory and punitive damages.” 

Employers impacted by SCDEA should take the necessary steps to implement a process for complying with SCDEA when requesting the credit history of applicants and employees.  Employers should carefully evaluate whether exemptions are applicable and should ensure there is a process in place to maintain the exemption log with the appropriate information required by the Commission.