Philadelphia Limits Use of Credit Information in Employment Decisions

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Last month, the city of Philadelphia amended its Fair Practices Ordinance making it an unlawful discriminatory practice for an employer to obtain or use credit-related information when making hiring, firing, promotion, discipline, or other decisions affecting a term or condition of employment. It is one of the few cities to enact such a law.

The ordinance defines “credit information” as any written, oral or other communication of information regarding a person’s debt; credit worthiness; standing, capacity, score or history; payment history; charge-off debts; bank account balances or other information; or bankruptcies, judgment, liens or other items under collection.

Certain exceptions to the ordinance exist: financial institutions – defined as any bank, savings and loan association, credit union, trust company, insurance or surety company, bank holding company, investment advisor, broker-dealer, entity registered with the SEC, or any subsidiary thereof. Also, any debts in connection with money owed to the City, as well as law enforcement agencies are exempt under the new ordinance.

Finally, the Ordinance exempts several other employers who use credit-related information in making employment decisions with respect to certain types of positions with managerial or financial responsibility, including:

• Jobs that require an employee to be bonded under Philadelphia, state or federal law;
• Supervisory or managerial jobs that involve setting the direction or policies of a business or division/unit of business;
• Jobs involving access to confidential or proprietary information that derives substantial value from secrecy; or
• Jobs involving significant financial responsibility or access to financial information of customers, other employees or the employer, but not including cashiers or other positions handling retail transactions.

Obviously, there is a wide swath of grey area in terms of exemptions.

The Ordinance further provides that if an employer intends to rely, in whole or in part, on credit information to take adverse employment action under any of the above listed exemptions, the employer must first: (1) disclose the fact of such reliance in writing to the applicant or employee; (2) state the particular information relied upon; and (3) must further provide the applicant or employee with an opportunity to explain the circumstances surround the information at issue, prior to taking any action.

The law went into effect on July 7. Employers who do business in Philadelphia and who are using, or considering using, any type of credit-related information in making employment decisions are encouraged to seek local counsel prior to so doing.

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Posted In: Legal