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.

Background Screening Compliance Update

Ban-the-Box Compliance Update

As a provider of employment screening, we feel an obligation to communicate the manner in which our services can and cannot be used. We stress compliance with FCRA requirements, adhering to EEOC guidelines, and state regulations for the well-being of your firm. Due to an increase in the number of cities and counties passing “ban-the-box” regulations, we are providing you an updated list. This will serve as an additional guide as to the role of background screening in your hiring process. Data here is from the National Employment Law Project (NELP.org). The table below details the differences in the “ban-the-box” regulations for each city. 

The differences are as follows:

• which employers the law applies to (public or private sector)

• which positions the law applies to (specific positions or all)

• when a background check can be issued (at what point in the hiring process)

• whether or not EEOC criteria is included in law

• the right of an applicant to appeal background screening results

• Whether or not a copy of the background check report is to be provided

*Policies apply to contractors doing business with the Human Services Department

You will notice that some of these cities/counties incorporate the EEOC guidelines in their ban-the-box policies. For those of you who are not familiar with these guidelines, I have included them below.

The Equal Employment Opportunity Commission’s Policy on Pre-Employment Background Checks:

“There is no Federal law that clearly prohibits an employer from asking about arrest and conviction records. However, using such records as an absolute measure to prevent an individual from being hired could limit the employment opportunities of some protected groups and thus cannot be used in this way.

Since an arrest alone does not necessarily mean that an applicant has committed a crime the employer should not assume that the applicant committed the offense. Instead, the employer should allow him or her the opportunity to explain the circumstances of the arrest(s) and should make a reasonable effort to determine whether the explanation is reliable.

Even if the employer believes that the applicant did engage in the conduct for which he or she was arrested that information should prevent him or her from employment only to the extent that it is evident that the applicant cannot be trusted to perform the duties of the position when:

• considering the nature of the job

• the nature and seriousness of the offense

• the length of time since it occurred.

This is also true for a conviction.

Several state laws limit the use of arrest and conviction records by prospective employers. These range from laws and rules prohibiting the employer from asking the applicant any questions about arrest records to those restricting the employer's use of conviction data in making an employment decision.

For more information, see,

 e.g., http://www.usis.com/commercialservices/transportation/FaqStateImpact.htm.

In some states, while there is no restriction placed on the employer, there are protections provided to the applicant with regard to what information they are required to report.

The Fair Credit Reporting Act (FCRA) imposes a number of requirements on employers who wish to investigate applicants for employment through the use of consumer credit report or criminal records check. This law requires the employer to advise the applicant in writing that a background check will be conducted, obtain the applicant's written authorization to obtain the records, and notify the applicant that a poor credit history or conviction will not automatically result in disqualification from employment.

Certain other disclosures are required upon the employee's request and prior to taking any adverse action based on the reports obtained.”

This information is from The Equal Employment Opportunity Commission

For more clarification from the EEOC about their policies, check out this article.

The importance of compliance cannot be overstated. I hope this serves as a compliance guide for you and your company. I will continue to provide updated information on the ever-changing laws in the employment screening industry. If you have any questions or comments, please feel free to provide your input. I will get back to you as soon as I can.

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 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/