EEOC: Use of Credit History in Hiring Decision is Discriminatory

The EEOC recently sued Kaplan Higher Education Corporation based upon the company’s use of credit histories in its hiring process. The lawsuit, filed in the Northern District of Ohio, builds upon the EEOC’s public stance warning employers not to use credit histories in the hiring process.

Kaplan, a private entity, owns and operates for-profit colleges and training schools throughout the United States. The EEOC’s lawsuit alleges that Kaplan engaged in discriminatory conduct when it considered the credit histories of job applicants in making hiring decisions. The EEOC further alleges that Kaplan’s use of credit histories are neither job-related nor justified as a business necessity, and that such use has a disparate impact against minority job applicants. Kaplan has stated that it performs credit checks on all applicants, and that its credit checks “are job-related and a necessity for [the] organization to ensure that staff handling financial matters, including financial aid, are properly screened.”

The EEOC’s lawsuit requests a permanent injunction to prevent Kaplan from using credit histories for hiring and other employment decisions in the future, lost wages and benefits, and employment offers for job applicants denied employment based upon Kaplan’s use of credit histories. The outcome of the Kaplan case could have a broad impact as many employers use credit checks in selecting candidates to fill job openings. Several states have already restricted the use of credit checks for hiring and other employment-related decisions, and Illinois will join those states beginning January 1, 2011.

For information on how this case may affect the hiring practices of your business, contact a member of the KDDK Labor and Employment Law Team.