Discrediting Credit History in Employment

The recent lawsuit by the EEOC against Kaplan Higher Education claiming that Kaplan’s practice of rejecting job applicants based on poor credit history is discriminatory on the basis of race points out the problems that employers can encounter because of the “disparate impact” cause of action under Title VII.  Any employment practice that discriminates against or screens out a segment of the employees based on race, age, gender, disability, religion, or national origin can be illegal and violate the discrimination laws.  Employers need to be careful that any hiring practice be job related and does not screen out identifiable groups of people, even if it does so unintentionally.  The unintentional aspect of the law in this area is usually a surprise to most people, as they generally consider actions to only be illegal if they are intentional.  In this case, the evidence will probably show that minorities generally have more negative credit histories than non-minorities, which would then screen them out of jobs.  This could be illegal even if the employer believed that the credit history information was valid in predicting good employees.  Of course, the EEOC has not yet prevailed in the lawsuit and Kaplan might escape liability if they have an “employer friendly” judge who will rule that credit history was job-related or that Kaplan had a legitimate business reason for utilizing the credit histories.