EEOC has filed a particularly newsworthy lawsuit against Kaplan Higher Education Corp.The suit is based on Kaplan’s alleged consideration of candidates’ credit histories during the hiring process. EEOC takes the position (and has, for quite some time), that employers may be engaging in unlawful employment discrimination by using a candidate’s credit history when deciding who to hire. EEOC contends that this practice, in which many employers engage regularly, has an unlawful discriminatory impact based on race and is neither job-related nor justified by business necessity. In short, EEOC alleges that employers, including Kaplan, are disproportionately disqualifying black candidates due to credit ratings.
Although I understand that there is a comfort to employers in using credit histories to screen clients, comfortable isn’t always the most desirable outcome. When an employer asks me about whether to rule out a candidate based on the candidate’s credit history, I usually suggest that it’s very possible that a top performing employee can be so focused on being a top performer that their personal lives are left unattended. In other words, you can imagine an employee whose personal credit is less than perfect because they’re too focused on work–not the worst employee that I can imagine, by far.
Another scenario is an employee who goes through a difficult divorce, which results in a poor credit rating. Or, alternatively, if the employee has had a serious family illness. This, also, can lead to financial difficulty and, in turn, to a less-than-stellar credit rating.
Of course, none of these scenarios are connected by race or ethnicity. Thus, I can’t say that I am particularly compelled by EEOC’s position in the Kaplan case. But neither am I compelled by a credit score–especially not in a difficult economy or in any economy when looking for the best possible employee for the job.
One final note. Illinois recently passed a law prohibiting employers from disqualifying candidates based on credit history. The law takes effect on January 1, 2011. Hawaii, Oregon, and Washington have similar laws. And, as of late summer, 2010, similar bills were pending in 15 states. So it seems indisputable that the practice is becoming more and more disfavored.