The EEOC has been pushing the idea that using credit reports to screen job applicants may discriminate on the basis of race—and it’s actively pursuing cases in federal court. The argument: Statistically, poor credit adversely affects black applicants more than others and isn’t a valid criterion for many jobs.
But now an Ohio federal court has limited the scope of a class-action lawsuit after the EEOC wanted to include many years of hiring history.
Recent case: Shandria Nichols, who is black, accepted an offer with Kaplan Higher Education in February 2009 but was terminated 10 days later when her credit history was deemed too poor for employment.
The EEOC sued on her behalf and on behalf of all other black applicants who had been turned down for a job with the company because of poor credit.
Kaplan asked the court to limit litigation to those cases that occurred within 300 days of Nichols’ administrative complaint, arguing that each hiring decision was a discrete act. The EEOC argued that using credit reports to screen out applicants (many whom happened to be black) was a continuing violation and therefore the agency should be able to use the older incidents to boost its claims.
The court sided with Kaplan, a decision that makes it much harder for the EEOC to show a disparate impact on black applicants because there will be fewer individuals involved. (EEOC v. Kaplan Higher Education, No. 1:10-CV-2882, ND OH, 2011)
Final note: Some state legislatures are pushing bills to limit an employer’s right to use credit history as a job-selection criterion. If you use credit histories, make sure you can articulate a sound business rationale. For example, poor personal credit may reasonably disqualify someone from a banking job, but may be irrelevant for many other positions.