EEOC Warns Employment Credit Reports Could Pose Bias Risk

EEOC Assistant Legal Counsel, Dianna B. Johnston published the following letter on the agency’s website in response to a complaint they received about employment credit reports. We strongly suggest that employers using credit reports take a look at their practices to ensure they comply with all federal laws and guidelines.
In your recent letter to Acting Chairman Stuart J. Ishimaru, you discuss employers’ use of credit checks to screen job applicants, and you urge that legislation be passed to prohibit this practice. Acting Chairman Ishimaru has asked our office to respond directly to you.

Initially, we note that the Equal Employment Opportunity Commission (EEOC) has no authority to enact legislation to prohibit employer credit checks. You may wish to contact the U.S. Senators for your state or the Representative for your congressional district to urge passage of federal legislation specifically targeting employer credit checks.
The Equal Employment Opportunity Commission (EEOC) enforces Title VII of the Civil Rights Act of 1964 (Title VII), as amended, 42 U.S.C. – 2000e et seq., which prohibits discrimination on the basis of race, color, sex, religion, or national origin; the Age Discrimination in Employment Act of 1967 (ADEA), as amended, 29 U.S.C. – 621 et seq., which protects individuals age 40 or older from employment discrimination because of age; Title I of the Americans with Disabilities Act of 1990 (ADA), 42 U.S.C. – 12101 et seq., which bars employment discrimination against qualified individuals with disabilities on the basis of disability; the Equal Pay Act, 29 U.S.C. – 206(d)(1), which prohibits sex-based wage discrimination; and Title II of the Genetic Information Nondiscrimination Act, 42 U.S.C. – 2000ff et seq., which prohibits discrimination based on genetic information.
While none of these laws directly prohibit discrimination based on credit information, they may be implicated in some circumstances. In particular, Title VII prohibits an employment practice that disproportionately screens out racial minorities, women, or another protected group unless the practice is job related and consistent with business necessity. Thus, if an employer’s use of credit information disproportionately excludes African-American and Hispanic candidates, the practice would be unlawful unless the employer could establish that the practice is needed for it to operate safely or efficiently. At an EEOC meeting in May 2007 on employment testing and screening, attorney Adam Klein testified that credit checks have not been shown to be a valid measure of job performance. Testimony of Adam T. Klein, Esq., EEOC Commission Meeting (May 17, 2007), http://www.eeoc.gov/eeoc/meetings/archive/5-16-07/klein.html. Some courts, however, have determined that credit checks are appropriate for certain positions, such as where an employee handles large amounts of cash. See EEOC v. United Virginia Bank/Seaboard Nat’l, 1977 WL 15340, 21 FEP Cases 1392 (E.D. Va. 1977) (even if the defendant bank’s credit check policy disproportionately screened out African-American job applicants, the bank had a business need to conduct pre-employment credit checks because employees handle large amounts of cash).
If you believe that you have been subjected to employment discrimination, you may file a discrimination charge with the EEOC. Charges must be filed within 180 days of the alleged discrimination or 300 days if the charge also is covered by a state or local anti-discrimination law. You may reach the EEOC field office nearest you by calling 1-800-669-4000 (voice) or 1-800-669-6820 (TTY).
We hope that this information is helpful. Please note that this letter does not constitute a written opinion or interpretation of the EEOC within the meaning of section 713(b) of Title VII of the Civil Rights Act of 1964, 42 U.S.C. – 2000e-12(b).
Sincerely,
Dianna B. Johnston
Assistant Legal Counsel
Our good friend Pam Devata offered the following suggestions in her recent article entitled, “Using Credit Wisely”. See her suggestions below.
* Evaluate Pre-employment Inquiries and Hiring Procedures
HR leaders should review key documents and processes to make sure they comply with the various state laws and the EEOC’s E-RACE initiative. Include in the review all documents beginning with employment applications and throughout the pre-employment/background-screening process.
For example, employers should evaluate when credit information is being sought and how it is being applied. Of course, employers obtaining and evaluating such information must also continue to ensure that the requisite disclosures are provided to the employee/applicant under the FCRA and applicable state laws.
* Consider Using Credit History More Narrowly
To comply with the new limits set by state laws and prepare to defend employment practices in the event of EEOC investigation, employers should reconsider the manner in which they are using credit. For instance, reliance on credit history may be a substantial concern for a high-level financial executive, while its application to a clerical position who does not handle cash may be more attenuated.
* Review Background Check Criteria with Counsel
The most critical proactive measure employers should take is to have their background-screening policies, employment applications and hiring criteria reviewed by counsel. Without doing so, employers are vulnerable to the possibility that the EEOC will become the first set of eyes to review them — and then it will simply be too late.
Article by, Nick Fishman and courtesy of EmployeescreenIQ