Better Double Check Your Use Of Credit Checks


Colorado, Maryland and Pennsylvania are the latest to join a growing number of states that have taken steps to limit an employer's ability to perform credit checks on its employees. So far, only four states have actually enacted laws limiting use of credit checks for employment purposes. But approximately 10 others have introduced similar legislation aimed at prohibiting employers from using information contained in an employee's credit history to deny employment, or basing employment decisions (such as transfers, reassignments, promotions or terminations) on such information. Additionally, at least two states already prohibit the use of credit checks for non-financial jobs.

EEOC Renews Interest In Disparate Impact Theory

The current push by states to limit credit checks for employment purposes comes on the heels of the Equal Employment Opportunity Commission's (EEOC) focus on the possibility that using credit histories in the employment context could have a disparate impact on protected groups, such as African-Americans, Hispanics, women, and those with disabilities.

Last October, the Commission held an informal review to scrutinize use of credit checks in the hiring and promotion process. During the public meeting, the Commission heard comments from several stakeholders, including the National Consumer Law Center, National Council of Negro Women, Society for Human Resource Management (SHRM) and U.S. Chamber of Commerce. A mere two months later, a more aggressive EEOC filed suit against Kaplan Higher Education Corporation claiming that Kaplan "engaged in a pattern and practice of unlawful discrimination by refusing to hire a class of black job applicants nationwide."

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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