We summarized the key provisions of the law in a prior post. The new law now provides that employers cannot do background checks until the conditional offer has been extended. It also requires that a City employer provides a written copy of this Article 23-A analysis to every applicant and, in the event of an adverse finding, offer the applicant at least three (3) business days to respond (during which time the position must be held open for the applicant). The City Commission has not published any regulations. However, it did put out a “Fair Chance Notice” that employers can use to comply with the notice requirement. You can adapt the form, as long as you capture the key provisions of the analysis.

Also, remember that even before the Fair Chance Act, Article 23-A of the New York State Correction Law required employers to consider multiple factors, including the date of a conviction and whether there is a connection between the conviction and the position sought, before rejecting an applicant who has a history of convictions. That law, of course, remains in effect and all hiring decisions are likely to come under increasing scrutiny. So, before you do a background check or reject an applicant based on the results of one, proceed very cautiously.

Finally, review all of your job postings and advertisements, and make sure that you do not state that there is any ban on hiring applicants with a criminal history. Such statements are most likely unlawful and could subject your company to litigation.

Briefly, under the FCA, an employer may only do a background check after a conditional offer of employment is made. If the offer is rescinded based on the results of the check, the employer must give the applicant the following: a copy of Article 23 of the Corrections Law (which already restricts job denials based on a conviction), a copy of the report, and a copy of the “employer’s analysis and the factors used to make the decision.” The job has to be held open for 3 days, to allow the applicant time to respond or offer some explanation or other information.

Predictably, the Commission is ”expansive” in its interpretation of the FCA. Among the more notable clarifications issued by the City Commission, employers should note that:

• An employer may use public sources (such as Google) to do a reference check, as long as the intent is not to obtain a criminal history (in other words, don’t search for “criminal record”).

• It will be considered a violation of the law to state in an advertisement that background or criminal checks will be conducted; but a statement that ‘reference checks’ will be conducted will be lawful.

• An employer will not lose the right to take action against an applicant who lies on an application, as long as it does not inquire of the criminal history until after there has been conditional offer.

• Temporary agencies will not have to conduct the full Article 23 analysis for each temporary job; however they may not honor a client request for ‘no felons’, unless this is required by federal or state law.

Employers will be allowed to offer comment on the effect of the FCA in 2016, and the City Commission has promised to offer training and to provide answers to “Frequently Asked Questions” on its website.

Employers will be well advised to be careful to comply with the FCA and to be cautious in making any adverse decision based on a conviction. Even before the Act was passed, the City Commission and the NY State Division have been aggressive in their pursuit of employers for violations of Article 23 of the Correction Law. If an employer rejects an applicant based on a conviction, the agencies expect to see evidence that all six factors listed in the Correction Law were considered, and some analysis as to why – based on those factors – the applicant was rejected. Now with the passage of the FCA, that enforcement will be stepped up.

The guidelines make it clear that employers who plan to rely on one of the Act’s exemptions and do credit checks should proceed very, very carefully, and keep very good records.

The law prohibits employers from requesting and using consumer credit histories for any job applicants or employees. It contains a number of exemptions, some of which were clear and some of which were not.

The Commission has now clarified some of the exemptions and issued some FAQs. What these clarifications show is that the exemptions should be construed narrowly, and should generally NOT be applied to clerical or lower-level employees, but limited to executive level staff.

Below are some of the exemptions, as clarified by the Commission:

• “Positions for which employers are required by law, regulation, or a self-regulatory organization to use an individual’s consumer credit history for employment purposes.”
  • Applies only to FINRA members with respect to employment decisions about people required to register with FINRA.

• “Non-clerical positions that entail regular access to trade secrets; “
  • Trade secrets do not include general propriety information such as handbooks/policies, recipes, formulas, customer lists, processed and other information regularly collected in the course of business or regularly used by entry-level and non-salaried employees and supervisor or managers of such employees.

• “Positions with responsibility for funds or assets valued at $10,000 or more.”
  • Limited to executive-level positions with overall financial control of the company such as CFOs and COOs, but does not apply to all staff in a finance department.

• “Positions with regular duties that allow the employee to modify digital security systems established to prevent the unauthorized use of networks or databases of the employer or the employer’s client.”
  • Limited to executive-level positions with control over access to all parts of the company’s computer systems, such as a CTO or a senior IT executive, but does not apply to all individuals who may have access to a computer system or network or even all staff in an IT department.

Employers should keep in mind that if they are claiming an exemption, they will be required to prove that the exemption applies. The law also requires them to inform the applicant or employee of the claimed exemption and keep records of all exemptions utilized for five years.

There are serious penalties for violations of the law (up to $250,000 for willful, wanton, or malicious violations, and up to $125,000 for other violations) in addition to other remedies available under the NYC Human Rights law.

Under the bill, but for a few exceptions, New York City employers with four or more employees are prohibited from requesting an applicant’s credit history for employment purposes all together. The measure goes further – protecting not only applicants during the hiring process, but even current employees by prohibiting employers from considering consumer credit history in decisions regarding “compensation, or the terms, conditions or privileges of employment.”

The measure defines “consumer credit history” broadly, encompassing not only an individual’s creditworthiness, credit standing, and credit capacity, as indicated by consumer credit report or credit score, but also information directly obtained from the applicant or employee regarding his or her (i) prior bankruptcies, judgments, or liens, or (ii) number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, or prior credit report inquiries.

After much lobbying and negotiation by business groups, the Council carved out a few exceptions for certain employers, namely those (i) required by state or federal law or regulation, or by a self-regulatory organization, to use consumer credit history for employment purposes; (ii) various public safety and law enforcement positions; (iii) position requiring bonding under city, state, or federal law; (iv) positions requiring possession of security clearance under federal or state law; (v) non-clerical positions with regular access to trade secrets, intelligence or national security information; (vi) positions with signatory authority over third party funds or assets valued at or involving fiduciary responsibility to the employer of $10,000 or more; or (vii) positions that allow modification of digital security systems protecting the employer or client’s network or databases.

The NYC ban on the use of credit history for employment purposes, for its part, is much more expansive than its counterparts in the ten states (California, Maryland, Connecticut, Hawaii, Illinois, Washington, Oregon, Vermont, Colorado, and Nevada) and two other localities (Chicago and Madison, WI).

The law will be effective 120 days after it is signed into law by Mayor Bill de Blasio. Once it becomes effective, the measure will afford aggrieved applicants and employees a private right of action and seek the same broad remedies available under other NYC Human Rights Law claims (ie. back pay, front pay, and compensatory damages).

In the interim, New York City employers using credit checks for employment purposes are well advised to review and modify their practices as necessary in anticipation of the law taking effect.