Federal Trade Commission Issues Final Rule on Noncompetes
On April 23, 2024, by a 3 to 2 vote, the Federal Trade Commission (FTC) issued a final rule to “promote competition by banning noncompetes...
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Do your background reports contain credit information about your candidates? Some states, and cities, restrict the use of certain credit information for employment purposes.
In New York City, the hub for the financial industry, you may expect the same. If you’re near Wall Street, you might think that looking at job candidates’ financial history would be a no-brainer. In many cases, NYC prohibits the use of consumer credit history for employment purposes.
The Stop Credit Discrimination in Employment Act (SCDEA) is a part of the New York City Human Rights Law (NYCHRL). It places restrictions on the use of consumer credit history information.
In NYC, consumer credit history is “an individual’s credit worthiness, credit standing, credit capacity, or payment history, as indicated by:
City law generally makes it an unlawful discriminatory practice to request or use an applicant or employee’s consumer credit history for employment purposes. It is also illegal to discriminate against an applicant or employee regarding hiring, compensation, or the terms, conditions, or privileges of employment based on the applicant or employee’s consumer credit history.
There are limited exemptions to the SCDEA’s prohibition on the use of consumer credit history. Consumer credit history can be used for employment purposes if:
The NYC Commission on Human Rights (NYCCHR) is the city agency charged with enforcing the SCDEA. It issued legal guidance to assist employers with compliance.
According to the NYCCR, if an employer chooses to claim an exemption, it should:
Verified Credentials provides clients with a sample New York City Consumer Credit Report Disclosure. This can help you think about how to notify candidates if you decide to claim an exemption to the SCDEA and obtain a consumer credit history for employment purposes. Log into your Resource Library for the sample disclosure.
The NYCCHR states that it will impose civil penalties of up to $125,000 for SCDEA violations. However, SCDEA violations resulting from willful, wanton, or malicious conduct could be penalized by up to $250,000.
Talk with your legal counsel to determine if the SCDEA applies to you and how to stay in compliance with NYC law.
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