Ohio District Court Dismisses EEOC Suit Challenging Credit Check Policies

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Anyone looking for a case rich in irony need look no further than EEOC v. Kaplan Higher Learning Edu. Corp., Case No. 1:10 CV 2882 (N.D. Ohio, Jan. 28, 2013). Kaplan provides, among other services, online college training, and it assists its students with obtaining financial aid from the United States Department of Education. In 2004, it found that some finance employees had misappropriated student funds. In response to this discovery, and to ensure compliance with Department of Education rules and regulations, it began performing credit histories on applicants for certain jobs, primarily those in its finance function.

In 2008, Kaplan hired an outside agency to review applicants’ credit reports for instances such as bankruptcies, mismatched social security numbers, collection activity, and similar matters. In those instances, the applicant was not immediately rejected, but only “flagged” for further review. For the first three years in the only those with defaulted student loans were rejected in the university’s financial aid department, a fairly reasonable standard given that these applicants themselves were to be working in the student loan process.   The school used different standards at different times for applicants to other financial positions. 

The EEOC brought suit against Kaplan in 2010, contending that the use of credit histories had a disparate impact against African-American applicants. Putting aside the obvious question of why requiring credit histories of finance employees working for a regulated industry with a recent history of financial improprieties was the least bit controversial, the case revealed some troubling facts about the EEOC’s own conduct.

Irony No. 1. The EEOC had the same policy. Yes, the court permitted discovery as to the EEOC’s own policies towards credit histories. It found that the EEOC’s own “Personnel Suitability and Security Program Handbook” required credit checks for 84 of the EEOC’s 97 positions. Thus, the EEOC was challenging a policy it created and followed itself.

Irony No. 2. The EEOC had the same reasons as Kaplan for doing so. The EEOC not only had the same policy, but had the same explanation for doing so. As the EEOC explained in its Handbook “overdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” How true.

Irony No. 3. The EEOC engaged in an alarming process to identify the “race” of applicants. Kaplan did not keep records of the race of applicants, so the EEOC attempted to identify their race from their drivers license photos obtained from state motor vehicle departments. It retained an expert who created a panel of “race raters” with degrees such as “cultural anthropology” and “economics” to make the determination, apparently, as to whether the applicant “looked” black, white, Asian, or Hispanic. The court’s opinion does not disclose how an economist, or, for that matter, the other panel members would have any more ability to determine race from a photograph than anyone else.

In any event, the court rejected this curious approach outright, finding that the EEOC didn’t even try to meet the standards of Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 579, 597 (1993). 

Although the court rightly rejected this process under Daubert, the EEOC’s attempt to use it raises disturbing questions about its own notions as to race and the growing numbers of Americans who can trace their ancestries to different ethnic groups. A government agency hiring alleged experts to figure out if someone “looks” black from pictures? The EEOC’s own training materials for its employees urges them not to rely upon an individual’s looks (in EEOC parlance “visual identification”) to determine their race. It might be interesting to see where the EEOC’s race rating panel would have put Alexandre Dumas (author of “The Three Musketeers” among other great books and one-fourth black), his son, also Alexandre Dumas  (author of “Camille”, and one-eighth black), Confederate General Stand Watie (one-fourth Cherokee) or any number of famous historical figures of mixed race heritage. Eradicating race discrimination is a noble goal, but such tactics disserve everyone.

Faced with no legitimate evidence that the employer’s use of credit histories had a disparate impact against African Americans, the court ultimately granted summary judgment in its favor.

The bottom line: The EEOC may have overextended itself in its zeal to address what it now considers to be “systemic discrimination,” but more thoughtful courts are rejecting such claims.

 

Topics:  Background Checks, Credit Reports, Discrimination, EEOC, Hiring & Firing, Kaplan, Race, Race Discrimination

Published In: Civil Rights Updates, Labor & Employment Updates

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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