On January 28, 2013, a federal court in Ohio handed the EEOC a loss when it ruled in favor of several employers for their use of a third party to perform credit checks on candidates for hire. The EEOC claimed that the employers' use of credit histories in making hiring decisions violates certain provisions of Title VII because the practice has a disproportionate impact on minority applicants.
As part of its claim, the EEOC hired experts who utilized data sampling to effectively guess the race of applicants to try and demonstrate a disproportionate negative impact of credit screening on minorities. The employers, who did not obtain applicant race information, argued that the EEOC experts could and should have simply determined the race of actual applicants, and the failure to do so made the sampling methodology unsound. The Court accepted the employers' arguments.
While recent headlines might suggest this result was a big win for employers, those headlines might be misleading as to the true implications of the case. The ruling was not an affirmation of the use of credit histories in the application process. Instead, the EEOC lost on a technicality, meaning the ultimate theory the EEOC is arguing, and which it is pursuing in similar cases in other courts, is far from resolved. The employers in the Ohio case were also helped by the fact that information on race was not collected as part of the employment application, a fact employers that are federal contractors will not have in their defense because they are required to obtain applicant race information. In future cases, we can also anticipate that the EEOC will learn from this mistake, use actual applicant race information, and if a disparate impact can be shown, the outcome for that next employer may be vastly different.
The EEOC also seems to be keeping employers somewhat in the dark on the use of credit information, having failed to release updated guidance on the topic of credit history use despite first raising the issue in October 2010 and updating guidance on the use of arrest and conviction records in April 2012. Unless and until the EEOC provides updated guidance, employers only have a handful of sentences from the EEOC advising against the practice because it "tend[s] to impact more adversely on minorities and females." In the meantime, and in light of the uncertainty arising from the EEOC's litigation regarding use of applicant credit history, employers would be wise to regularly review their application process with counsel to ensure compliance with ongoing legal issues, as well as the applicable laws that vary greatly amongst the states.
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