EEOC Suit Against Employer Screening Applicants Based on Credit History Information Dismissed

by Littler

In April 2012, the Equal Employment Opportunity Commission (EEOC) issued its updated enforcement guidance concerning how, in its view, Title VII of the Civil Rights Act of 1964 (Title VII) restricts an employer's discretion to consider criminal records relative to employment decisions.1 The EEOC was scheduled to release at the same time its updated guidance concerning the use of credit history information, but at the last minute decided (without explanation) not to do so. Even before April 2012, however, the EEOC filed lawsuits against a handful of employers, including Kaplan Higher Education Corporation (Kaplan), for allegedly violating Title VII by relying on criminal and credit records. On January 28, 2013, the district court judge in EEOC v. Kaplan Higher Education Corp.2 granted Kaplan's motion to dismiss the case without a trial, holding the EEOC failed to meet its threshold burden as the plaintiff to prove that Kaplan's screening practices disproportionately excluded protected class members (i.e., had the requisite "disparate impact"). The opinion is significant for employers because: (1) the subject of background checks remains high on the EEOC's agenda (in fact there is an ongoing case in Maryland3); and (2) at least for employers who are not government contractors, the EEOC may face more hurdles than it expected in proving disparate impact. Because the court decided the matter based solely on the threshold question of disparate impact, it unfortunately did not reach other important issues, such as whether the EEOC can challenge an employer's use of credit history information when the Commission itself relies on such information in the hiring process. This uncertainty reinforces the benefit to employers of reviewing their background check and related programs.

Background of the Kaplan Litigation

In December 2010, the EEOC sued Kaplan in federal district court in Ohio, alleging that Kaplan's use of pre-employment credit checks had an unlawful disparate impact on protected class members in violation of Title VII.4

On November 30, 2012, Kaplan and the EEOC filed separate motions for judgment before trial (known as summary judgment). On the same date, Kaplan also moved to exclude the testimony of the EEOC's expert witness. Kaplan's motions argued that: (a) the EEOC failed to identify a particular employment practice that allegedly had caused the purported disparate impact; (b) the EEOC's proffered expert opinion was inadmissible because it failed to satisfy the federal standards for reliable expert testimony (the Daubert standard), and in any event failed to consider other factors impacting the disparate impact analysis, such as non-common non-discriminatory explanations; and (c) Kaplan's use of credit history information was job-related and consistent with business necessity. The EEOC argued in its motion that the court should reject, as a matter of law, Kaplan's proposed affirmative defense that its use of credit history information was job-related and consistent with business necessity.

On January 28, 2013, the district court granted Kaplan's motion to strike the EEOC's expert opinion and motion for summary judgment, and dismissed the EEOC's lawsuit. The district court also denied the EEOC's motion. In doing so, the court determined that the EEOC had failed to provide reliable statistical evidence of discrimination, and, therefore, failed to satisfy its threshold burden of proving that Kaplan's use of credit history information resulted in a disparate impact on protected class members.

Kaplan did not collect information regarding the race of each applicant. Therefore, to determine the basic fact of the race of the applicants at issue, the EEOC's expert had obtained data from the Department of Motor Vehicles in 38 different states and Washington D.C. While 14 of those states had provided specific data on the applicants' races, 24 states provided only copies of the applicants' drivers' licenses. The district court noted that the EEOC's expert attempted to manufacture data related to those applicants' races by assembling a team of five individuals (so-called "race-raters") that reviewed the pictures on the drivers' licenses and purported to determine the individual's race. Where four of the five "race raters" agreed on the person's apparent race, the EEOC's expert assumed the "race-raters" had it right. 

The district court held that the expert's practice of using "race raters" was not reliable under the standards set forth by the U.S. Supreme Court in Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 579 (1993), pursuant to which courts are required to act as "gate keepers" in determining whether purported expert evidence is sufficiently reliable and relevant to be heard by a jury, by examining a non-exhaustive list of factors. Those factors include whether the expert's technique or theory can be or has been tested or subject to peer review and publication, known potential error rates, and whether the theory or technique used by the expert has been generally accepted in the scientific community. The district court held that the EEOC failed to proffer any proof that the use of "race raters" was scientifically accepted, had been the subject of peer-reviewed publication, or had a scientifically acceptable rate of error. Moreover, the district court noted that the EEOC itself on its website in other contexts had discouraged employers from using this same method (visual identification) to ascertain individuals' races. 

Furthermore, the district court and Kaplan both noted that the EEOC apparently chose not to simply contact the individuals directly to ascertain their race, which presumably would have been more reliable than the process the expert used. In addition, the district court observed that the EEOC's expert did not use a representative sample in his analysis. First, the EEOC's expert did not use a random sample. Second, Kaplan's expert witness opined (without contradiction by the EEOC) that the final sample pool used by the EEOC's expert consisted of a much higher percentage of individuals who had failed Kaplan's credit checks than the percentage of the entire applicant pool that had actually failed Kaplan's credit checks.

Because the district court held that the EEOC's expert evidence was inadmissible, it concluded that the EEOC could not present a prima facie case of disparate impact discrimination as it could not show that Kaplan's use of credit checks had caused the applicants' exclusion because of their membership in a protected group. The district court explicitly refused to consider the many other issues the parties raised, such as whether the EEOC had adequately identified a particular practice allegedly causing the disparate impact, whether the EEOC was estopped from challenging Kaplan's practices, and whether Kaplan's use of credit checks was job-related and consistent with business necessity.

Implications for Employers

The EEOC indisputably is pursuing an aggressive agenda of targeting what it views as discriminatory practices through "practice and pattern" cases, including investigations and lawsuits focusing on hiring and employment policies related to credit checks and criminal records. A very concrete and fairly recent example of this is the EEOC's January 2012 $3.13 million settlement in a dispute concerning criminal records.5 It remains to be seen how the EEOC will respond to the dismissal of its suit against Kaplan without a trial. Because the district court's decision is not technically binding on any other court and focused only on whether the EEOC had presented reliable expert testimony, however, it is likely that the EEOC will continue to pursue litigation against employers while it further hones its methods of proof and expert techniques. In addition, the EEOC's objectionable use of "race raters" in the Kaplan case resulted from, first, the fact that Kaplan did not maintain race data on applicants and, second, that the EEOC chose not to contact the affected individuals directly to ascertain their races. Either or both of those factors may not be present in future cases or for all employers, such as federal contractors who, unlike Kaplan, are required to maintain data on applicants' races.

In the meantime, employers should consider reviewing their credit and criminal record-based screening policies and procedures to assess whether they are consistent with Title VII as interpreted by the EEOC. Of course, employers that consider credit history information and/or criminal records for employment purposes must be mindful not only of the EEOC's interpretation of Title VII, but related federal and state laws, including the fair credit reporting laws such as the Fair Credit Reporting Act,6 and state fair employment laws restricting inquiries into, and the use of, credit history and criminal records (e.g., the new laws in Vermont and Newark, New Jersey7).

1 See Rod Fliegel, Barry Hartstein, and Jennifer Mora, EEOC Issues Updated Criminal Record Guidance that Highlights Important Strategic and Practical Considerations for Employers, Littler ASAP (Apr. 30, 2012).

2 No. 1:10-cv-02882, ECF 110 (Jan. 28, 2013).

3 See EEOC v. Freeman, No. 8:09-cv-02573 (D. Md.).

4 As Littler previously reported, earlier in the case discovery had actually revealed that the EEOC itself used credit history in screening applicants for employment, which the district court had held was relevant to Kaplan's asserted defense of the business necessity of its practices. See Rod Fliegel and Alex Frondorf, Do As I Say, Not As I Do: EEOC Required to Provide Discovery of Its Employment Practices, Littler ASAP (Apr. 30, 2012).

5 See Press Release, Equal Employment Opportunity Commission (Jan. 1, 2012), available at

6 See Rod Fliegel and Jennifer Mora, The FTC Staff Report on "40 Years of Experience with the Fair Credit Reporting Act" Illuminates Areas of Potential Class Action Exposure for Employers, Littler Report (Dec. 12, 2011).

7 See Rod Fliegel and Jennifer Mora, Vermont Becomes the Eighth State to Restrict the Use of Credit Reports for Employment Purposes, Littler ASAP (June 18, 2012) (discussing Vermont’s new restrictions on using credit history information); see also Rod Fliegel, Jedd Mendelson, and Jennifer Mora, Employers in Newark, New Jersey Must Comply with a New Ordinance Broadly Restricting Their Discretion to Rely on Criminal Records for Employment Purposes, Littler ASAP (Oct. 22, 2012) (discussing Newark, New Jersey's new restrictions on using criminal history information).

Rod Fliegel, Co-Chair of Littler Mendelson's Hiring and Background Checks Practice Group, is a Shareholder in the San Francisco office; Jennifer Mora is an Associate in the Los Angeles (Century City) office, and William Simmons is an Associate in the Philadelphia office. If you would like further information, please contact your Littler attorney at 1.888.Littler or, Mr. Fliegel at, Ms. Mora at, or Mr. Simmons at

Written by:


Littler on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.