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Hot streak over? EEOC loses bid to limit credit histories in hiring

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in Discrimination and Harassment,Employment Background Check,Human Resources

Our recent story—“Employer beats EEOC in credit-history fight”—describes a major victory for employers. Now, perhaps, we can expect more courts to look skeptically on some of the EEOC’s tactics, giving employers more tools to build the workforces they need.

The EEOC has been aggressively targeting the use of credit histories to screen out job applicants. It believes the practice discriminates against minorities—particularly blacks—as a class.

Last fall, the EEOC sued Kaplan Higher Education for using credit histories to select job applicants. (EEOC v. Kaplan Higher Education, No. 1:10-CV-2882, ND OH, 2011)

In May, the federal district court in Cleveland dealt a huge blow to the EEOC. It prohibited the EEOC from litigating any employment decision made more than 300 days before plain­tiff Shandria Nichols filed her discrimination charge with the agency.

The case started on Feb. 26, 2009, when Nichols complained about discrimination to the EEOC. She alleged that Kaplan fired her because of the results of a credit history check—a practice she said discriminated against her and other black job applicants as a class. On Dec. 21, 2010, the EEOC sued Kaplan for a pattern and practice of discrimination.

‘No exception exists’

Ruling against the EEOC, the district court relied on Title VII’s 300-day statute of limitations for the filing of any charge of discrimination. The court limited the EEOC’s potential class and barred it from seeking relief for any employment decisions that occurred more than 300 days before Nichols filed her initial charge. There­fore, the cut-off date was May 2, 2008.

In its decision, the court wrote:

“[Title VII] requires a charge to be filed, under the facts of this case, within 300 days after the allegedly unlawful employment practice occurred. Thus, the EEOC may only act where a charge of discrimination has been filed, and such charges must be filed within 300 days of the unlawful employment practice. Plainly, if a charge is not filed within that time limitation, the EEOC may not act upon it. No ­exception exists in the statute ­allowing the EEOC to recover damages for individuals whose claims are other­wise time-barred.”

Tide turning for EEOC?

Make no mistake: Employers won an important round with this case. It serves as a hard-line limitation on the EEOC’s ability to resuscitate and litigate stale claims. It limits the number of potential claimants in an EEOC pattern-and-practice class, which, in turn, hinders the agency’s ability to leverage large classes into large settlements.

Perhaps more significantly, this ruling also joins a growing list of federal court cases that are taking the EEOC to task for overstepping its bounds. Hope springs eternal for employers facing EEOC enforcement lawsuits, provided they are willing to expend the time (and money) to hold their ground.

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