EMPLOYEE CREDIT CHECKS IN NEW YORK NO LONGER CHECK OUT

By: Nicholas Graziano

New York City is often at the forefront of progress against economic class based discrimination.[1] Recently, the largest city in the United States has been the first to take a stance against a new form of discrimination, as it has recently banned employment required credit checks.[2] In May of this past year, as of new laws past by Mayor De Blasio, employers in the city can no longer run credit checks when making employment decisions.[3] NYC’s ban is an important step forward in “leveling the playing field” against inequality.[4] Employer credit checks cause a perpetual paradox of poverty where citizens, specifically citizens of minority groups and those already exposed to income disadvantages, are further barred from potential employment and therefore cannot pay off any debts they may already owe.[5] Credit checks are used by nearly half of our nation’s employers, in all employment positions, from entry level to management.[6]

Employers have little logical reason for running credit checks on potential employees.[7] Employers often claim that bad credit and spending habits often correlate to poor job performance and a “bad labor market outcome.”[8]   A very in depth study points out that on multiple different specifications, “measures of future credit status do not convey negative information about the character-related component of employee productivity.”[9] The study elaborates further that “indicators of future bad credit are associated with significantly lower initial wages, but this wage differential is the result of factors that are visible to employers at the beginning of the employment relationship” eliminating a need for these credit checks.[10] The study found no correlation between bad credit and poor job performance and explained further that this is only the employer’s pretextual excuse for conducting employee credit checks.[11]   Thankfully, because of New York’s statute passed in May, employers in the city can no longer run credit checks before offering employment to potential employees.[12]   In the words of Mayor De Blasio, “[e]very New Yorker applying for a job deserves a fair shot” “[t]his bill will remove a barrier to employment and ensure that people are judged on their merits and ability, rather than unrelated factors”.[13] The City bans these checks because poor credit can result from a whole host of reasons that don’t truly affect an employee’s job performance or ability to complete job duties.[14] Denying jobs to potential employees on the grounds of a poor credit history is allowing those who are already economically, and often socially, disadvantaged to be disadvantaged further.[15] New York’s ban on employee credit checks is an important step in the right direction in leveling the playing field for all New Yorkers regardless of inco

[1]   Amy Traub, The Progressive Victory You Haven’t Heard of: NYC’s Ban on Employment Credit Checks, THE AMERICAN PROSPECT, http://prospect.org/article/progressive-victory-you-havent-heard-nycs-ban-employment-credit-checks (last visited Sept. 30, 2015).

[2]   Id.

[3]   Id.

[4]   Id.

[5]   Id.

[6]   Id.

[7]   Andrew Weaver, Is Credit Status a Good Signal of Productivity?, 68 ILR REVIEW 4 (July 2015) available at http://ilr.sagepub.com/content/68/4/742.

[8]   Id.

[9]   Id.

[10] Id.

[11] Id.

[12] News, Office of the Mayor, NEWYORKCITY.GOV, http://www1.nyc.gov/office-of-the-mayor/news/293-15/mayor-de-blasio-signs-legislation-prohibit-employers-using-credit-checks-screen#/0 (May 6, 2015) (last visited October 3, 2015).

[13] Id.

[14] Id.

[15] Id.

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