Do as I Say: The EEOC and Credit Checks

 On October 10, 2010, the EEOC held a public hearing on the impact that the use of credit history has on employee selection and potential discrimination. The press release  summarizing the hearing carried the by-line that some witnesses said the practice can have a disparate impact on minorities and is not predictive of job performance.

Fast forward to the 6th Circuit's decision in EEOC v. Kaplan Higher Education Corp [an enhanced version of this opinion is available to lexis.com subscribers]. The EEOC had filed suit based on its theory that the practice of reviewing credit history caused the company to screen out more African American applicants that white applicants which created a disparate impact in violation of Title VII. The district court had granted summary judgment to Kaplan.

While the court's decision is 7 pages long, its first and last paragraphs are really all that need to be read. In the first paragraph, the court notes that the EEOC is suing Kaplan "for using the same type of  background check that the EEOC itself uses."  The court quoted from the EEOC's handbook which states "{o}verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations."  The court stated that Kaplan had the same concerns and runs credit checks for positions that provide access to student financial loan information.

With respect to the evidence in support of the EEOC's position, the court stated, The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself. Summary judgment was affirmed.

Kaplan obtained a discovery order requiring the EEOC to produce its own hiring practices. The court's view of the "do as I say, not as I do" approach is evident from its language. One might expect the agency to issue a "stand down" order to review the bases for cases it has filed and plans to file. One might also expect the agency to simply view this decision as one court's opinion and pursue its agenda with respect to use of credit history.

 For additional Labor and Employment law insights from John Holmquist, visit the Michigan Employment Law Connection.

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