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New D.C. Law Restricts Employer Use of Credit Histories in Employment Decisions

Authors: Gustavo A. Suarez (Greenville), Denise E. Giraudo (Washington DC)

Published Date: February 27, 2017

On February 15, 2017, Washington, D.C., Mayor Muriel Bowser signed into law the District of Columbia’s Fair Credit in Employment Amendment Act of 2016 (FCEAA). This Act, which amends the District’s Human Rights Act of 1977, follows other jurisdictions, such as New York City and Philadelphia, in significantly restricting an employer’s ability to inquire into or use an applicant’s or employee’s credit history in making employment decisions. The Act is expected to go into effect after (1) a 30-day period of congressional review and (2) publication in the District of Columbia Register.

Scope

The Act covers all employers that employ one or more employees in the District of Columbia. Importantly, it only applies to applicants or employees who are actually employed or are applying to be employed in the District of Columbia. And, in such instances, the individual must prove that (1) the prohibited activity occurred in the District, and/or (2) the effects of the prohibited activity are felt in the District (i.e. the employee was located in the District of Columbia at the time of the prohibited activity). 

Overview of Restrictions

The FCEAA governs the use of credit information by employers and prohibits discrimination on the basis of such information. The Act defines “credit information” broadly to include “any written, oral, or other communication of information bearing on [an applicant’s or] employee’s creditworthiness, credit standing, credit capacity, or credit history.”

The Act has two primary sets of prohibitions: (1) on inquiries into an applicant’s or employee’s credit information and (2) on an employer’s use of credit information.

Inquiry Restrictions. The FCEAA prohibits most employers from inquiring into a D.C. applicant’s or employee’s credit information, including:

  1. directly or indirectly requiring, requesting, suggesting, or causing any applicant or employee to submit credit information;
  2. accepting credit information on an applicant or employee; or
  3. making inquiries into an applicant’s/employee’s credit information (including through application forms, interviews, and credit checks). 

Thus, the Act limits employers: (1) from making most inquiries into an applicant’s or employee’s credit information (either directly or through a third party, including a consumer reporting agency/background check provider), (2) from providing background check disclosure and authorization forms (D&A forms) that mention credit checks to employees, or (3) from having an applicant or employee complete D&A forms that mention credit checks.

Use Restrictions. The FCEAA also prohibits most employers from using or referring to an applicant’s/employee’s credit information. Specifically, the Act prohibits employers from engaging in any of the following acts if they are based, in whole or in part, on an individual’s credit information:

  1. failing to hire or refusing to hire an applicant;
  2. discharging an employee; or
  3. otherwise discriminating against an individual with respect to his or her employment, including with regard to:
    1. compensation; or 
    2. the terms, conditions, or privileges of employment (including promotions).

Advertising Restrictions

The Act prohibits employers from printing or publishing any notice or advertisement that indicates any preferences, limitations, specifications, or distinctions based on an applicant’s credit information.

Exemptions from Restrictions

The FCEAA’s prohibitions do not apply in certain limited circumstances, including:

  1. situations where the employer is required by D.C. law to require, request, suggest, or cause any applicant/employee to submit credit information, or use, accept, refer to, or inquire into an applicant’s/employee’s credit information;
  2. when an applicant/employee is applying for a law enforcement position;
  3. when an applicant/employee is required to possess a security clearance under D.C. law;
  4. situations involving a financial institution (as defined by section 102(18) of the 21st Century Financial Modernization Act of 2000) if the position in question involves access to personal financial information; and
  5. situations involving an employer that received credit information pursuant to a lawful subpoena, court order, or law enforcement investigation.

Public Education Campaign

The D.C. Office of Human Rights will engage in a public information campaign to educate employers, as well as applicants/employees, about the Act’s requirements over the next few months.

The D.C. Fair Credit in Employment Amendment Act of 2016 and credit check laws in other jurisdictions, including federal, state, and local background check requirements, are summarized in the O-D Comply: Background Checks subscription materials, which are updated and provided to O-D Comply subscribers as the law changes.

 

Gustavo A. Suarez  (Greenville)

Gustavo A. Suarez
Gustavo (“Gus”) Suárez assists employers with a broad range of employment law issues, including federal, state, and local background check and e-signature law (including single-plaintiff and class action defense); EEOC investigations and charges; and immigration compliance (including I-9 training and internal audits). He also regularly counsels management on Title VII issues.Gus is a regular, highly-rated speaker on topics like background check law, e-signature requirements,...

Denise E. Giraudo  (Washington DC)

Denise E. Giraudo
Denise Giraudo counsels and represents management in a wide range of labor and employment litigation matters. Ms. Giraudo has successfully represented employers before state and federal courts as well as various local and federal administrative agencies. Her extensive litigation practice includes representing employers in connection with discrimination claims under all applicable local, state and federal statutes, disability accommodation claims, whistleblowing claims under the Sarbanes-Oxley...

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