Labor & Employment Law

EEOC Issues Guidance on Use of Credit Checks in Employee Selection

In an advisory letter, the EEOC discusses the subject of disparate impact discrimination under Title VII and whether the practice of using the information obtained in a credit check as a selection criteria for job applicants would have an adverse impact on members of protected groups. 

It is not at all unusual for employers to obtain a credit checks part of their hiring practices.  The EEOC reminds us, however, if it's position on this subject.  Specifically, 

"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)."

Forewarned is forearmed.

Full post as published by Strategic HR Lawyer on May 05, 2010 (boomark / email).