Court Throws Out EEOC’s Challenge to Use of Credit Information in Hiring

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In a decision that was more a commentary on the sufficiency of the EEOC's expert witness than a victory for employers' hiring practices, a federal court in Ohio dismissed the EEOC's challenge to Kaplan Higher Learning Education Corporation's use of applicants' credit information in hiring.*

Kaplan reviewed applicants' credit information for "financial stress or burdens" or for information that might suggest the applicant would commit fraud or theft.  Information that might disqualify an applicant for employment included bankruptcy, unpaid child support, and unpaid debts or other obligations greater than $2,000.  In some instances Kaplan reviewed credit information only for applicants for certain positions, and in other instances, all applicants' information was subject to review.

The EEOC sued Kaplan, alleging that the use of credit information in hiring had a disparate impact on African-American applicants and therefore violated Title VII.  In other words, the EEOC alleged that Kaplan's use of credit information operated to disproportionately exclude African-American applicants from employment.

The district court dismissed the case on Kaplan's motion for summary judgment.  It held that the EEOC had failed to provide any reliable statistical evidence that the use of credit information disparately impacted African-American applicants, which it must do in a disparate impact case.  The court focused on the methodology used by the EEOC's expert.  The expert determined the race of many Kaplan applicants by asking a panel to view the applicant's driver's license photograph and attempt to agree on the applicant's race.  The court agreed with Kaplan that this methodology was unreliable, and thus the expert's statistical analysis was unreliable.

Although a victory for Kaplan, this case provides no meaningful guidance to employers as to the permissible use of credit information in hiring.  The one lesson from the case is that future challenges to the use of credit information-by the EEOC or by individuals-will depend in large part on a battle of expert witnesses.

* EEOC v. Kaplan Higher Learning Edu. Corp., No. 1:10 CV 2882 (N.D. Ohio Jan. 28, 2013).