Yesterday, the U.S. Equal Employment Opportunity Commission sued Kaplan Higher Education Inc. for race discrimination, based on its practice of using credit reports to winnow out job applicants. The EEOC filed a class action suit in federal court in Ohio, alleging that the credit report use is more likely to single out African-American candidates.
As with job testing, employers need to be careful to tailor their screening requirements to the needs of the job. Courts are more likely to accept a bank’s argument that people with poor credit histories might pose a risk of embezzlement than the same argument from a schoolteacher.
With the enormous numbers of layoffs and foreclosures, the credit reports of many hardworking, talented people have taken a hit. Unemployment rates are higher among minority groups, leading to the disparate impact identified by the EEOC.