New York employers facing end to job applicant credit checks

Be it bad credit or no credit, starting Saturday employers on Long Island and throughout New York will no longer be able to consider a job candidate’s credit history in hiring decisions.

Employers, with some exceptions, will be restricted from using consumer credit scores or debt history when considering a jobseeker for a role, or when planning promotions for existing workers, according to legislation signed into law by Gov. Kathy Hochul in December.

Officials with the governor's office did not respond to requests for comment Wednesday.

The law, which was set to go into effect 120 days after its signing, bars most employers, as well as employment agencies and labor organizations, from using credit reports or scores in hiring decisions.

"At the end of the day, this law ensures that people are evaluated by what they can do and not by their financial circumstances from the past," said Cecilia Oyediran, an attorney with the Labor and Employment Law program at Cornell’s Industrial and Labor Relations School, which reviewed the bill.

The law also bars employers from looking into information on credit debts, late payments or collections, and information on bankruptcies or liens for candidates and existing employees, Oyediran said.

She added that, while local data is unavailable, studies from the Urban Institute, a Washington D.C.-based nonprofit research organization, have shown that because credit checks often hurt lower-income individuals with spotty credit histories, they disproportionately impact jobseekers of color. 

About 50% of U.S. employers conduct credit history checks on prospective employees, according to a report from the Urban Institute. The report also found that Black, Hispanic and female jobseekers were most likely to have difficulty meeting expenses, impacting credit scores and debt loads. 

The new law makes New York the 11th state in the country to place a restriction on credit checks during the hiring process, according to Littler Mendelson P.C., a nationwide employment and labor law firm.

While the rules limit the practice of looking at credit histories for most job roles, it provides exemptions for certain job titles.

Applicants for positions regulated by federal law, such as jobs in the financial industry, jobs in law enforcement, positions requiring security clearance, jobs that handle trade secrets or positions that have "signatory authority over third-party funds or assets" worth $10,000 or more, can still have their credit history checked, according to the legislation. 

Some local staffing agencies said they rarely see requests for credit checks from employers.

Jim Morris, owner of Farmingdale Express Employment Professionals, a franchised staffing firm, said while he's had some employers request credit history checks for C-suite level positions or for high-ranking accounting jobs, it's seldom.

"It’s very rare," Morris said. "Ninety to 95% of the positions are not checking for credit until you get into recruiting for higher positions."

Morris said most of the positions his company helps fill are for jobs that pay under $75,000 a year.

Employment and labor law attorney Jessica M. Baquet, a partner at Westerman Ball Ederer Miller Zucker & Sharfstein in Uniondale, said while most of her business clients don't require credit checks, many employers may utilize third-party background check providers who may include credit checks as part of their offerings. 

In preparation for the legal change, Baquet said employers should make sure they are "not, just as a matter of course, pulling a credit check because it is being offered."

Additionally, she said, employers should review their vetting procedures to ensure that only positions exempt from the new law are having their credit histories considered.

"Every single time there’s a change in the law, it’s always a good time to go back to your employee handbook and see what sit says," Baquet said. "Even if you change what you’re doing, if you have outdated policy in writing, that’s not helpful."