We published an article with Thomson Reuters Practical Law summarizing key employment issues for financial services employers, highlighting those rules applicable to registered representatives regulated by Financial Industry Regulatory Authority (FINRA). With Thomson Reuters Practical Law’s permission, we have attached it here.

My colleague Nathaniel M. Glasser recently authored Epstein Becker Green’s Take 5 newsletter.   In this edition of Take 5, Nathaniel highlights five areas of enforcement that U.S. Equal Employment Opportunity Commission (“EEOC”) continues to tout publicly and aggressively pursue.

  1. Religious Discrimination and Accommodation—EEOC Is Victorious in New U.S. Supreme Court Ruling
  2. Transgender Protections Under Title VII—EEOC Relies on Expanded Sex Discrimination Theories
  3. Systemic Investigations and Litigation—EEOC Gives Priority to Enforcement Initiative
  4. Narrowing the “Gender Pay Gap”—EEOC Files Suits Under the Equal Pay Act
  5. Background Checks—EEOC Seeks to Eliminate Barriers to Recruitment and Hiring

Read the Full Take 5 here.

By:  William J. Milani and Anna Kolontyrsky

The Eastern District of New York has rejected a claim for relief under the New York State Human Rights Law (“NYSHRL”) brought by a job applicant who alleged that a bank unlawfully discriminated against her based on her criminal history. In Smith v. Bank of America Corp. (subscription required), Smith, who worked as a temporary employee at Bank of America, was encouraged by her supervisor to apply for full-time employment.  Before doing so, she informed her supervisor that she had been arrested and charged with a misdemeanor but that the charges had been dismissed after she participated in New York’s adjournment in contemplation of dismissal (“ACD”) program. The ACD process was created so that persons charged with minor offenses would not be permanently identified as criminals.  The program allows for the postponement of a criminal case with the understanding that if the accused fulfills certain conditions, all charges will be dismissed and the arrest and prosecution leading to the ACD will “be deemed a nullity.”
Smith stated that the Bank assured her that the arrest would not hinder her chances of obtaining full-time employment. In fact, Smith received a job offer; but the Bank subsequently withdrew that offer after a routine background check revealed that she had been arrested and charged with petit larceny.  Smith immediately challenged the background check, explaining that the charges against her had been dismissed pursuant to the ACD.  When the Bank still refused to hire her, Smith filed a lawsuit alleging violations of the NYSHRL.

The NYSHRL limits the ability of employers to make adverse employment decisions on the basis of criminal history.  The statute provides in relevant part that it “shall be an unlawful discriminatory practice, unless specifically required or permitted by statute, for any…corporation or association…to make any inquiry about, whether in any form of application or otherwise, or to act upon adversely to the individual involved, any arrest or criminal accusation not then pending against that individual which was followed by a termination of that criminal action or proceeding in favor of such individual.”  In other words, the statute prohibits employers from denying any individual a job due to an arrest that did not result in a conviction.  The fact that Bank of America withdrew its offer of employment as a result of Smith’s dismissed charge was undisputed.  Instead, the Bank argued that its refusal to hire Smith was actually protected by the NYSHRL, as the rule specifically allows employers to rely upon arrest records in making employment decisions when “specifically required or permitted by statute.”

Federal law prohibits FDIC-insured banks, except “with the prior written consent of the [FDIC],” from hiring any person who “has agreed to enter into a pretrial diversion or similar program in connection with the prosecution of” any criminal offense involving dishonesty.  As an FDIC-insured national bank, the Bank argued that it was barred from hiring Smith because the ACD program is a “pretrial diversion or similar program” and petit larceny constitutes a crime of “dishonesty.”

The Court agreed.  It found that New York’s ACD program is a “pretrial diversion or similar program” and that, according to FDIC policy, crimes of dishonesty include those in which the defendant is accused of wrongfully taking property from another in violation of a criminal statute. Because under N.Y. Penal Law a “person is guilty of petit larceny when he steals property,”  Smith’s crime was covered under the FDIC definition of dishonesty.  Accordingly, the Court held that Bank of America was required by federal law “not to hire [Smith] after being informed of the results of her background check” and that the bank “did not violate [N.Y. Exec. Law §] 296(16) by refusing to hire her in the absence of a waiver by the FDIC.” 

Thus, an applicant who participates in New York’s ACD program may not be protected by the NYSHRL when seeking employment with an FDIC-insured national bank.  Before conducting a background check on any employee or applicant, however, employers should consult the relevant legal statutes.  For example, the federal Fair Credit Reporting Act and various state laws impose requirements on employers, such as securing employee authorization before a background check is conducted by a credit reporting agency.

By:  John F. Fullerton III

As a direct result of the financial crisis, an increasing number of states have enacted or are considering statutes that prohibit or restrict employers from obtaining and using credit reports for making hiring and other employment decisions.  Eight states have now passed such legislation – California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Washington and Vermont.  Similar legislation is pending in many other states – including New Jersey and New York – and bills have been introduced at the federal level as well.  In most states that have passed such legislation, there is some form of exemption specifically applicable to various types of financial institutions.  For example,


  • Connecticut and Vermont exempt “financial institution[s]” (broadly defined in the statutes).
  • Hawaii exempts “financial insitutions insured by a federal agency.”
  • Illinois exempts “entities engaged in banking, insurance and debt collection.”
  • Oregon exempts “federally insured banks or credit unions.”
  • Maryland exempts both “financial institutions that accept deposits that are insured by a federal agency (including an affiliate of the financial institution)” and “[a]n entity (or its affiliate) that is registered as an investment advisor with the U.S. Securities and Exchange Commission.”

New York has several relevant bills pending that would affect the use of credit reports for employment purposes.  The most significant of these is called the Credit Privacy in Employment Act (A.B. 8070-A / S.B. 4905), which was referred to the Assembly Committee on Consumer Affairs and Protection on May 27, 2011.  On May 25, 2012, the Committee proposed that the key amendments be moved from the Executive Law to the General Business Law,  and the bill was recommitted to the Committee.

The key text of the Assmebly bill currently provides:

No employer, employment agency, or licensing agency, or agent, representative or designee thereof, shall (1) use information in the  credit  history  of  a  job  applicant  or employee  in  connection with or as a criterion for employment decisions related to hiring, termination, promotion, demotion, discipline, compensation, or the terms, conditions or privileges of employment; or  (2) request the job applicant’s or employee’s credit history for  such purpose.

Currently, the only exception is if the employer is required by state or federal law to use individual credit history for employment purposes.  It is possible that an exception for financial services institutions similar to those that exist in other state laws will find its way into the legislation as part of a compromise to obtain passage of the bill, but that remains to be seen.  Thus, the financial services community in New York should be aware of the possibility that these restrictions on using, or even requesting, credit history for employment purposes may end up applying – assuming New York joins the trend and the legislation is enacted.  We’ll report back if it is.