In Brief

The following is a brief legal update from the NAAAHR-GNY Legal Committee.  Working to keep NAAAHR-GNY members informed with changes in the law.

IN BRIEF:Updates to NYC Background Check Laws

The summer of 2015 was an eventful one in terms of the New York CityCouncil making drastic changes to the employment laws of the City.  The focus of this IN BRIEF are the changes the Council made to the background check laws governing whether and how employers in NYC can check into the financial and/or criminal background of candidates for hire, and employees.

Credit Checks

Effective September 3, 2015, The NYC Stop Credit Discrimination in Employment Act (SCDEA) broadly prohibits employers with 4 or more employees (and agencies) from requesting or using “consumer credit history” in employment decisions against candidates and employees.

“Consumer credit history” is defined as an individual’s credit worthiness or payment history as indicated by:  (a) a consumer credit report; (b) credit score; or (c) information the employer obtains directly from the individual regarding their credit accounts (including such items as late or missed payments or items in collection) or bankruptcies, judgments or liens.  *Does not prohibit employers searching online, but that has its own risks under Title VII & similar laws.

Exceptions to the prohibition of doing credit checks:

  • When required by state or federal law or regulations;
  • When required by “a self-regulatory organization as defined in section 3(a)(26) of the Securities Exchange Act of 1934” (g., FINRA);
  • For employment as a police officer or public official in a position involving a “high degree of public trust”;
  • For positions in which an employee is required to be bonded under City, state or federal law;
  • For positions in which an employee is required by law to possess security clearance or has regular access to intelligence information or national security information;
  • For non-clerical positions having regular access to “trade secrets” (which is defined under the law and specifically excludes client, customer or mailing lists);
  • For positions that have signing authority over third party funds or assets of $10,000 or more or that involve fiduciary responsibility to the employer with authority to enter financial agreements on behalf of the employer of $10,000 or more; or
  • For computer security positions where the regular duties allow the employee to modify digital security systems in place to prevent the unauthorized use of an employer’s or client’s networks or databases.

The NYC Commission on Human Rights issued guidance on SCDEA on September 2, 2015.  According to the Guidance, an employer claiming one of the exemptions from the law should:

  • Inform applicants of the exemption that applies prior to conducting the credit check; and
  • Maintain a record (an “exemption log”) that includes, among other things, applicants/employees who are subject an exemption, the applicable exemption, the job duties and qualifications for the exempted position, the basis for the claimed exemption, information about any other applicants/employees considered for the position, a copy of the credit history obtained by the employer, how it was obtained, and where applicable, how the credit history led to the employment action.

The Commission expects employers to share this information with them upon request.  Penalties up to $125,000 for violations, and up to $250,000 for willful violations.

Criminal Background Checks

Effective October 27, 2015, the NYC Fair Chance Act (a/k/a “Ban the Box”) generally prohibits employers with 4 or more employees from making any inquiry regarding an applicant’s pending arrest or criminal conviction record . . .  until after a conditional offer of employment has been made.  “Inquiry” not only includes oral or written questions, but also includes searching publicly available sources (i.e., web searches).

Exceptions include employers that are required by law to conduct criminal background checks, also police, peace officers, law enforcement-related employers.

Employers who conduct a criminal background check after extending a conditional offer of employment and then make an adverse employment action based on the results of the criminal background check must do the following:

  • Provide the applicant with a written copy of the inquiry in a format to be provided by the NYC Commission on Human Rights;
  • Perform the analysis required by Article 23(a) of the NY Corrections Law (i.e., type of crime, age of person at the time of the crime, how long ago the crime was committed, evidence of rehabilitation, etc.);
  • Provide applicant with a copy of the analysis in a format to be provided by the NYC Commission on Human Rights, which includes supporting documents and the employer’s explanation of its decision to make an adverse employment action, and;
  • Allow the applicant at least 3 business days to respond to the written analysis by keeping the job open for that time.

If the employer uses a consumer reporting agency, then the federal Fair Credit Reporting Act’s (FCRA) requirements must also be met.

These changes to NYC employment law are significant and require employers and HR to make immediate changes to practices and policies.  Consult with legal counsel, train staff, and revise hiring documentation to insure compliance.

This employment law update is provided by the NAAAHR-GNY Legal Committee as a service and benefit to NAAAHR-GNY members.  Contact us at with any questions, or submit questions for a confidential response via our “Ask the Attorneys” .  Follow us on Twitter at @NAAAHRGNY_Legal.