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3 Practices that Will Drive How the EEOC vs Kaplan (Credit Check Lawsuit) Plays Out In Court...

It's the gift that keeps on giving, right?  Do you have the right as an employer to decline a candidate for an open position at your company based on them having bad credit?

The answer is yes.  There's no law against it.  But - you might think twice about that, because theMo_money_2 EEOC just popped Kaplan Learning Systems with a huge lawsuit.  More from the Washington Post:

"The Equal Employment Opportunity Commission on Tuesday sued The Washington Post Co.'s Kaplan Higher Education unit, alleging that it discriminated against black job applicants by refusing to hire people based on their credit histories.

The federal lawsuit alleges that Kaplan needlessly evaluated the credit histories of potential hires in a way that had a disparate negative impact on black job applicants. The commission said the practice has been in place since at least January 2008."

The EEOC said it is seeking to stop the practice and win wages, benefits and offers of employment for people who were not hired by Kaplan because of the alleged wrongdoing. The commission said it tried to reach a settlement with Kaplan before filing suit.

"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," said Debra Lawrence, the regional EEOC lawyer who is overseeing the suit against Kaplan."

I've got mixed feeling about this.  Do we really need to screen credit on every job in an organization?  I'd say the answer is no.  Should employers have the right to make decisions on how they want to screen candidates?  I'd say the answer is yes.

The devil is in the details, and the details will probably drive how this lawsuit plays out.   Some considerations that will drive this in court:

1. Was Kaplan simply declining people on a credit score threshold?  Can that threshold score be positioned as being artificially high, thus causing the decline of thousands of candidates a court would have deemed credit worthy by a "reasonable" standard?  

2. Was Kaplan simply establishing the threshold as "if you have a bankruptcy, you can't work here?"  My guess is that type of threshold would be seen as more viable by a court - because it declines fewer candidates.

3. Or was Kaplan operating under the "we know it when we see it standard", with wild fluctuations on what was acceptable and what was not?  If that's the case, they're screwed.

It's a powder keg issue, but one thing is for sure.  The Kaplan suit will cause a lot of employers to check their practices during and after the holidays.  

Merry Christmas.  Watch the credit card debt you take on while buying last minute presents, and don't let the number of times you fail to make a payment on your credit card exceed 4 times in 2011.



"t's a powder keg issue, but one thing is for sure. The Kaplan suit will cause a lot of employers to check their practices during and after the holidays." -good idea

I think that if anything companies should look at their practices when it comes to hiring.

Harry Joiner

I'm no lawyer, nor do I play one on TV. But logic says that if this practice is not illegal, then it should not matter how Kaplan applied the practice. (Likewise, if there's no law against my wearing my socks over my shoes, then it wouldn't matter what color socks I wore over my shoes. Logically.)

However, I look at what battles this administration has chosen to fight, like Arizona SB 1070, and my cynical view is that if it will help this administration curry favor with certain voter blocks, you can expect the Feds to pursue the issue anyway. It's about heat; not light.

How's that for a politically incorrect blog comment??


I don't get it. Are the EEOC saying that there's a relationship between being black and having a poor credit record? Surely plenty of black people have good credit records and plenty of white people have poor credit records? If having a bad credit record is a function of your race it's a poor criterion for disqualification, but I'm not convinced.

That said, why do companies want to do a credit check in the first place? What does having a bad credit record really say about you? That you're dishonest? Unreliable? Have no self-control? Or just unfortunate? It may be more trouble than it's worth.


Hi Geoff -

The EEOC is saying that using credit checks causes "disparate impact" on blacks, meaning that by using this as a reason to eliminate candidates, it has a greater impact on this group than other groups.

It's also centered around the question of whether this is truly required for most jobs... When people use credit checks, they usually do it for cash handling positions or those vulnerable to embezzlement - under the assumption that those with economic pressure are more apt to steal.

The slippery slope comes in when companies use it for positions that don't handle cash, etc....

Thanks - KD

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