NYC Passes Bill Banning Credit Checks in Hiring Process

Pending Mayor DeBlasio signing the bill (Int.0261-2014) into law, New York City will join a growing a list of U.S. localities eliminating credit checks from the background screening process. The New York City Council passed the bill last Thursday April 16, 2015 by a vote of 47-3. Ten states (CA, MD, CT, HI, IL, WA, OR, VT, CO, NV) and two cities (Chicago, IL and Madison, WI) set precedent for NYC’s latest legislature.

One’s credit history, according to the bill, consists of:

• Prior bankruptcies, judgments, or liens

• Number or credit accounts

• Late or missed payments

• Charged-off debts

• Items in collection

• Credit limit

• Prior credit report inquiries

• Items in collections

This bill, an amendment to the NYC Human Rights Law, would make it an unlawful discriminatory practice for an employer to use an individual’s consumer credit history in making employment decisions. Due to the sensitive nature of various employment positions that require additional layers of security, the bill would provide exceptions to several positions.

Exemptions from the credit check ban include:

• An employer, or agent thereof, that is required by state or federal law or regulations or by a self-regulatory organization as defined in section 3(a)(26) of the securitiesexchange act of 1934

• Police officers or any position with a law enforcement or investigative function

• A position in which an employee is required to be bonded under City, state, or federal law

• A position that requires security clearance under federal or state law

• A non-clerical position having regular access to trade secrets, intelligence information, or national security information

• A position having signatory authority over third party funds or assets valued at $10,000 or more

• A position that involves fiduciary responsibility to the employer with the authority to enter financial agreements valued at $10,000 or more on behalf of the employer

• A position with regular duties that allow the employee to modify digital security systems established to prevent the unauthorized use of the employer’s or client’s networks or databases

New York City employers will need to pay close attention as this unfolds. Should this bill become law, modification of employers’ background screening policies will be necessary.

Vermont Joins Growing Number of States Restricting Use of Credit Checks for Employment Purposes

Effective July 1, 2012, Vermont joins California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Washington, as jurisdictions which restrict an employer’s right to obtain and use credit information for making employment decisions.

Under this new law, a Vermont employer may not inquire about or use an applicant or employee’s credit report or credit history with respect to employment, compensation, or a term, condition, or privilege of employment unless: 1. The information is required by state or federal law or regulation; 2. The position being sought or held involves access to confidential financial information (defined as sensitive financial information of commercial value that a customer or client of the employer gives explicit authorization for the employer to obtain, process, and store and that the employer entrusts only to managers or employees as a necessary function of their job duties); 3. The employer is a financial institution as defined in 8 V.S.A.§ 11101(32) or a credit union as defined in 8 V.S.A. § 30101(5);  4. The position being sought or held is that of a law enforcement officer as defined in 20 V.S.A. § 2358, emergency medical personnel as defined in 24 V.S.A. § 2651(6), or a firefighter as defined in 20 V.S.A. § 3151(3); 5. The position being sought or held requires a financial fiduciary responsibility to the employer or a client of the employer, including the authority to issue payments, collect debts, transfer money, or enter into contracts; 6. The employer can demonstrate that the information is a valid and reliable predictor of employee performance in the specific position being sought or held;  and/or 7. The position being sought or held involves access to an employer’s payroll information.  However, even if an employer can avail itself of one of these exemptions, the applicant or employee’s credit report or history may not be the sole factor in decisions regarding employment, compensation, or a term, condition, or privilege of employment.

If an employer is lawfully permitted to obtain credit history, the employer must: 1. Obtain the employee’s or applicant’s written consent each time the employer seeks to obtain the employee’s or applicant’s credit report; and 2.  Disclose in writing to the employee or applicant the employer’s reasons for accessing the credit report, and if an adverse employment action is taken based upon the credit report, disclose the reasons for the action in writing. The employee or applicant has the right to contest the accuracy of the credit report or credit history.

Vermont employers who conduct credit checks must closely review this statute to ensure that information is only obtained where permitted by law and that all necessary disclosures are provided to applicants and employees.   Further, even if an exemption is applicable, a Vermont employer must not base any employment decisions solely on credit history.

Feel free as always to direct any questions on the appropriate use of Credit Reports to compliance@s2verify.com

California the 7th State to Prohibit the Use of Credit Checks

Make sure that you have updated your policy and procedures in the following seven states.

California Governor Jerry Brown recently signed a state law banning the practice of credit checks for employment. California thus joins a growing list of state with similar statutes, which includes Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington.

The California law does include exemptions from the ban. These include applicants for certain management-level jobs, law enforcement, positions whose duties would include access to customer’s personal data, and jobs calling for the direct handling of money.

California Joins Other States in Placing Restriction on Employers' Use of Credit Checks

One Minute Memo: California Joins Other States in Placing Restrictions
on Employers' Use of Credit Checks

On October 10, 2011, Governor Brown signed into legislation Assembly
Bill No. 22, which generally prohibits employers from using an
applicant's or employee's credit history in making employment decisions.
Prior to this legislation, employers could request a credit report for
employment purposes if they provided prior written notice of the request
to the person for whom the report was sought. Assembly Bill 22
significantly changes this landscape by prohibiting employers from using
credit reports for employment purposes unless the report is used for one
of the limited purposes enumerated by the statute.

To view the full alert, please click on the link below:

www.seyfarth.com/OMM101011/

How to Stimulate the Economy and Create Jobs

With the recent recession and all the hard times of many American's, there has been a lot of movement by local states and the EEOC to ban credit checks for employment purposes.   Statistically, credit checks are not used very often for the mass number of background checks performed.   In fact, only 13% of  companies  perform credit checks on all their applicants.  

Also, there is no correlating data that suggest a bad credit score is an indication that someone will steal from the company.   That being said, I am still shocked that the average person doesn't realize that employee theft is a serious problem.
Consider statistics from the American Society of Employers:

• Businesses lose 20% of every dollar to employee theft.
• 20% of employees are aware of fraud at their companies (including theft of office items, false claims of hours worked, and inflated expense accounts).
• The average time it takes for an employer to catch a fraud scheme is 18 months.
• 55% of perpetrators are managers.
• 44% of workers say their companies could do more to reduce fraud.
• The U.S. Retail Industry loses $53.6 Billion a year due to employee theft.
• 60% of companies have staff trained to deal with fraud and ethics issues (up from 30% in 2000).

The U.S. Chamber of Commerce estimates that 75% of all employees steal at least once, and that half of these steal again and again. The Chamber also reports that one of every three business failures are the direct result of employee theft.

Also, 30% of businesses fail due to employee theft.   This is a serious problem for our economy and jobs. In fact, most small companies do not perform  employment screening.  Background Screening could stop a lot of loses and improve business and hiring. Imagine if those 30% of businesses continued to operate and hired employees.