Credit checks in California now tougher than ever

Lexology.com
Fisher & Phillips LLP
USA
October 12 2011

Effective January 1, 2012, California employers will have to avoid yet another potential legal hazard that haunts businesses with the threat of costly penalties: the unauthorized use of consumer credit reports regarding job applicants and current employees.
Currently, pursuant to the California Consumer Credit Reporting Agencies Act, employers can request a consumer credit report (i.e., a report obtained from a consumer credit-reporting agency bearing on an individual's credit worthiness, credit standing, or credit capacity) for purposes of evaluating an applicant or employee for employment, reassignment, or retention. But starting next year a valid reason for obtaining a consumer credit report should be viewed as being the exception rather than the rule.

Full Story: http://www.lexology.com/library/detail.aspx?g=e6149caa-f2a6-42f7-9b69-f399188bfe96&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Other+top+stories&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2011-10-19&utm_term=

Employers beware: credit checks may expose you to unwanted discrimination claims

Lexology.com
Greenberg Traurig LLP
Mona M. Stone
USA
January 11 2011

Can an employer be sued based on its use of credit checks during hiring? Yes, at least according to the Equal Employment Opportunity Commission (EEOC). There appears to be a new enforcement direction from the EEOC, as evidenced by certain recent court filings. Over the past several months, the agency has filed complaints on behalf of classes of workers, claiming that their employers participated in patterns or practices of illegal discrimination when refusing to hire a protected class or classes of job applicants based on credit histories.

Full Story: http://www.lexology.com/library/detail.aspx?g=972a4b44-5c3a-4626-81f8-9526fda04966&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Other+top+stories&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2011-01-17&utm_term=

EEOC Files Nationwide Hiring Discrimination Lawsuit Against Kaplan Higher Education Corp.

U.S. Equal Employment Opportunity Commission
PRESS RELEASE
12-21-10

Company’s Use of Job Applicants’ Credit History Discriminates Because of Race, Federal Agency Charges

CLEVELAND – Kaplan Higher Education Corporation, a nationwide provider of postsecondary education, engaged in a pattern or practice of unlawful discrimination by refusing to hire a class of black job applicants nationwide, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it announced today.
Since at least 2008, Kaplan Higher Education has rejected job applicants based on their credit history. This practice has an unlawful discriminatory impact because of race and is neither job-related nor justified by business necessity, the EEOC charged in its lawsuit.
As a result of these practices, the company has violated Title VII of the Civil Rights Act of 1964, according to the lawsuit (Civil Action No. 1:10-cv-02882) filed by the EEOC’s Cleveland Field Office in U.S. District Court for the Northern District of Ohio. It is a violation of Title VII to use hiring practices that have a discriminatory impact because of race and that are not job-related and justified by business necessity.
The EEOC attempted to reach a voluntary settlement before filing suit. The EEOC seeks injunctive relief in its lawsuit, as well as lost wages and benefits and offers of employment for people who were not hired because of Kaplan Higher Education’s use of job applicants’ credit history.
“Title VII of the Civil Rights Act of 1964 was intended to eliminate practices that serve as arbitrary barriers to employment because of a job applicant’s race,” said Regional Attorney Debra Lawrence of the EEOC’s Philadelphia District Office, which oversees Pennsylvania, Delaware, West Virginia, Maryland, and portions of New Jersey and Ohio. “Employers need to be mindful that any hiring practice be job-related and not screen out groups of people, even if it does so unintentionally.”
Workplace discrimination charge filings with the federal agency nationwide rose to an unprecedented level of 99,922 during fiscal year 2010.
The EEOC enforces federal laws prohibiting employment discrimination. Further information about the EEOC is available on its web site at www.eeoc.gov.

http://www.eeoc.gov/eeoc/newsroom/release/12-21-10a.cfm

Discrimination suit targets UMiami credit screen

The Associated Press
Posted on Tuesday, 11.23.10

MIAMI -- A federal lawsuit contends that University of Miami credit history checks of job candidates discriminate unfairly against minorities.
The potential class-action lawsuit filed Monday claims that use of credit histories in hiring decisions violates the Civil Rights Act. The suit argues there is no link between credit histories and job performance or trustworthiness. It also says minorities tend to have more credit issues than whites and others.

Read more: http://www.miamiherald.com/2010/11/23/1939382/discrimination-suit-targets-umiami.html#ixzz166vk0Bp9

Lawsuit Press Release
PR Web

Lawsuit Accuses University of Miami of Racial Discrimination for Rejecting Job Applicants Based on Credit History

http://www.prweb.com/releases/University_of_Miami/Discrimination_lawsuit/prweb4820444.htm

A Bad Credit Score Could Keep You Unemployed

The Root
Employers and the EEOC may be heading for a confrontation over the use of credit ratings in hiring.
By: Sherrilyn A. Ifill
Posted: November 15, 2010 at 12:01 AM

It's a cruel irony of life that, as Billie Holiday sang, "Them that's got shall get," but practices in today's job market suggest that those in the best position financially have a better chance of being hired to fill the limited openings available. That's because credit checks are increasingly becoming a standard practice for employers. Thirty-five percent of employers admitted that they checked applicants' credit in making hiring decision in 2003. It's believed that the percentage of employers relying on credit checks has increased dramatically in the two years since the onset of the nation's economic crisis. This means that those who most need a job -- unemployed men and women who have fallen behind in home or car payments -- may be less likely to be hired than similarly qualified, but financially secure, applicants.

Full Story: http://www.theroot.com/views/bad-credit-score-could-keep-you-unemployed

New credit-checking legislation signed into law

Lexology.com

Vedder Price PC
Thomas G. Hancuch, Laura Sack, Roy P. Salins and Christopher Nybo
USA August 16 2010

Last April, we alerted you to a fast-moving proposal in the Illinois General Assembly to prohibit employers from using an employee’s credit history in employment decisions (Check Your State Law Before Credit-Checking Your Employees, 4/13/10). With Governor Patrick Quinn’s signature one week ago, this proposal became law. When it goes into effect on January 1, 2011, Illinois will join a small group of states banning credit checks for most job applicants.
The Employee Credit Privacy Act (Public Act 096-1426) (the “Act”) generally prohibits employers in Illinois from:
refusing to hire, discharging or otherwise discriminating against an applicant or employee because of the individual’s credit history or credit report;
inquiring about an applicant’s or employee’s credit history; or
ordering or obtaining an applicant’s or employee’s credit report.
“Credit history” is defined as an individual’s past borrowing and repaying behavior, including paying bills on time and managing debt and other fi nancial obligations, while “credit report” means any written or other communication of any information by a consumer reporting agency that bears on a consumer’s creditworthiness, credit standing, credit capacity or credit history.

Full Story: http://www.lexology.com/library/detail.aspx?g=38aa0492-d8d8-4d6f-a7c7-62aa3e7d872d&utm_source=Lexology%20Daily%20Newsfeed&utm_medium=Email&utm_campaign=Lexology%20subscriber%20daily%20feed&utm_content=Lexology%20Daily%20Newsfeed%202010-08-20&utm_term=

EEOC issues advisory opinions on possible disparate impact in credit checks, education requirements

Lexology.com
Baker Donelson Bearman Caldwell & Berkowitz PC
USA May 4 2010

On March 29, 2010, the EEOC’s Office of Legal Counsel released two informal discussion letters addressing disparate impact in credit checks and education requirements.
Disparate Impact of Credit Searches
Although none of the laws enforced by the EEOC directly prohibit discrimination based on credit information, they may be implicated in some circumstances, explains the EEOC’s first informal discussion letter, released March 29, 2009. For example, an employer’s use of credit information that disproportionately excludes African-American and/or Hispanic candidates would be unlawful unless the employer could establish that the practice is needed for it to operate safely or efficiently. The letter addresses the concerns of an individual who wrote to Acting Chairman Stuart J. Ishimaru urging that legislation be passed to prohibit the practice of credit checks to screen job applicants. In the letter, Assistant Legal Counsel Dianna B. Johnston responded that while the EEOC has no authority to enact legislation, the EEOC was of the opinion that credit checks have not been shown to be a valid measure of job performance. Johnston did, however, note that some courts have determined that credit checks are appropriate for certain positions, such as where an employee handles large amounts of cash.

Full Story: http://www.lexology.com/library/detail.aspx?g=f4955214-1cf2-4786-9192-76f4613fc98a&utm_source=Lexology%20Daily%20Newsfeed&utm_medium=Email&utm_campaign=Lexology%20subscriber%20daily%20feed&utm_content=Lexology%20Daily%20Newsfeed%202010-05-14&utm_term=

EEOC: Job credit checks could pose bias charge risk

Lawyers USA
Published: April 6, 2010

WASHINGTON - The Equal Employment Opportunity Commission has released a legal advisory letter warning that the use of credit checks to screen job applicants could be unlawful if it leads to the disproportionate exclusion of women, minorities and other protected group members.
While noting that neither the use of credit checks by employers nor discrimination based on credit scores violates federal employment laws, EEOC assistant legal counsel Dianna B. Johnston wrote that the their use could be unlawful if it has a disparate impact on members of protected groups.
“In particular, Title VII prohibits an employment practice that disproportionately screens out racial minorities, women or another protected group unless the practice is job-related and consistent with business necessity,” wrote Johnston in a letter posted on the EEOC’s website last week. “Thus, if an employer’s use of credit information disproportionately excludes African-American and Hispanic candidates, the practice would be unlawful unless the employer could establish that the practice is needed for it to operate safely or efficiently.”
Johnston also noted evidence suggesting that while credit checks have not been shown to be a valid measure of job performance, they can be appropriate for certain positions, such as where an employee handles large amounts of cash.

Full Story: http://lawyersusaonline.com/blog/2010/04/06/eeoc-job-credit-checks-could-pose-bias-charge-risk/

EEOC Letter posted on its website:

The U.S. Equal Employment Opportunity Commission
EEOC Office of Legal Counsel staff members wrote the following letter to respond to a request for public comment from a federal agency or department. This letter is an informal discussion of the noted issue and does not constitute an official opinion of the Commission.
Title VII: Employer Use of Credit Checks
March 9, 2010
[ADDRESS]
Dear ____:
In your recent letter to Acting Chairman Stuart J. Ishimaru, you discuss employers’ use of credit checks to screen job applicants, and you urge that legislation be passed to prohibit this practice. Acting Chairman Ishimaru has asked our office to respond directly to you.
Initially, we note that the Equal Employment Opportunity Commission (EEOC) has no authority to enact legislation to prohibit employer credit checks. You may wish to contact the U.S. Senators for your state or the Representative for your congressional district to urge passage of federal legislation specifically targeting employer credit checks.
The Equal Employment Opportunity Commission (EEOC) enforces Title VII of the Civil Rights Act of 1964 (Title VII), as amended, 42 U.S.C. § 2000e et seq., which prohibits discrimination on the basis of race, color, sex, religion, or national origin; the Age Discrimination in Employment Act of 1967 (ADEA), as amended, 29 U.S.C. § 621 et seq., which protects individuals age 40 or older from employment discrimination because of age; Title I of the Americans with Disabilities Act of 1990 (ADA), 42 U.S.C. § 12101 et seq., which bars employment discrimination against qualified individuals with disabilities on the basis of disability; the Equal Pay Act, 29 U.S.C. § 206(d)(1), which prohibits sex-based wage discrimination; and Title II of the Genetic Information Nondiscrimination Act, 42 U.S.C. § 2000ff et seq., which prohibits discrimination based on genetic information.
While none of these laws directly prohibit discrimination based on credit information, they may be implicated in some circumstances. In particular, Title VII prohibits an employment practice that disproportionately screens out racial minorities, women, or another protected group unless the practice is job related and consistent with business necessity. Thus, if an employer’s use of credit information disproportionately excludes African-American and Hispanic candidates, the practice would be unlawful unless the employer could establish that the practice is needed for it to operate safely or efficiently. At an EEOC meeting in May 2007 on employment testing and screening, attorney Adam Klein testified that credit checks have not been shown to be a valid measure of job performance. Testimony of Adam T. Klein, Esq., EEOC Commission Meeting (May 17, 2007), http://www.eeoc.gov/eeoc/meetings/archive/5-16-07/klein.html. Some courts, however, have determined that credit checks are appropriate for certain positions, such as where an employee handles large amounts of cash. See EEOC v. United Virginia Bank/Seaboard Nat’l, 1977 WL 15340, 21 FEP Cases 1392 (E.D. Va. 1977) (even if the defendant bank’s credit check policy disproportionately screened out African-American job applicants, the bank had a business need to conduct pre-employment credit checks because employees handle large amounts of cash).
If you believe that you have been subjected to employment discrimination, you may file a discrimination charge with the EEOC. Charges must be filed within 180 days of the alleged discrimination or 300 days if the charge also is covered by a state or local anti-discrimination law. You may reach the EEOC field office nearest you by calling 1-800-669-4000 (voice) or 1-800-669-6820 (TTY).
We hope that this information is helpful. Please note that this letter does not constitute a written opinion or interpretation of the EEOC within the meaning of section 713(b) of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-12(b).
Sincerely,Dianna B. JohnstonAssistant Legal Counsel

http://www.eeoc.gov/eeoc/foia/letters/2010/titlevii-employer-creditck.html

Recruiters’ Use of Criminal and Credit Checks Colliding With Legislative Constraints

Workforce Management
October 2009
Even employers that limit the types of screening results that will lead to adverse hiring decisions may violate federal law.
By Fay Hansen

Explosive growth in the background screening industry during the past decade has generated near-universal adoption of criminal checks and a steady rise in credit checks for all U.S. job candidates.
In some industries, recruiters are using criminal and credit screening as a quick and easy method for culling the ever-larger pile of applications. But this growing reliance on screening is on a collision course with new legislative restrictions, legal challenges and mounting evidence that such results are poor predictors of behavior and performance.
Even employers that limit the types of screening results that will lead to adverse hiring decisions may violate federal law. On October 1, the Equal Employment Opportunity Commission filed a discrimination lawsuit against Freeman Cos., a nationwide convention and corporate events marketing company.
Since at least 2001, Freeman has rejected job applicants based on their credit history and if they have had various types of criminal charges or convictions, the suit claims. The EEOC says these exclusionary practices are not job-related or justified by business necessity.
In March, the EEOC settled a lawsuit against Franke Foodservice Systems, which refused to hire a black applicant who disclosed a felony conviction on his application even though the company hired a white applicant a year earlier who made a similar disclosure. A spate of EEOC and private lawsuits are pending against other companies for unlawfully denying employment to people with criminal records or bad credit histories.

Full Story: http://www.workforce.com/archive/feature/26/74/44/index.php