Foster Swift Municipal Law News
Most employers, including municipalities, recognize that once an employee is hired, there are many factors to consider before terminating even an at-will employee. The decision to terminate employment is rarely risk-free. To help avoid having to make a termination decision, some charged with hiring decisions have thought about returning to various applicant-screening techniques to select applicants they believe will result in productive, successful employees. But be careful. Not all screening tools are appropriate in all circumstances or for all employers.
The Equal Employment Opportunity Commission (EEOC)’s recent suit against Kaplan Higher Education Corporation should be a warning. The EEOC claims that Kaplan’s use of applicants’ credit history is unlawfully discriminatory based on race. The key allegation states
. . . 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.
According to the EEOC, Kaplan used credit history checks as a selection tool in making hiring decisions in a way that had a significant disparate impact on black job applicants. Rejecting applicants on the basis of financial criteria such as poor credit ratings has been found in the past to disproportionately exclude minority groups.
In certain situations, financial problems may be used as a basis to argue that an applicant is financially irresponsible, reflecting poorly on character or reliability. But keep in mind that financial problems may be caused by circumstances beyond the applicant’s control, such as uninsured, unexpected medical bills. Because the reason for a poor credit check result may not be directly correlated to the employee’s skills or reliability, rejecting every applicant with a poor credit history may not be objective at all but instead may disproportionately affect certain groups for reasons that are not directly related to the particular job for which they applied.
Whether the EEOC’s current case will be proven remains to be seen, but the EECO’s press release makes the writing on the wall clear: “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.” Municipalities should be aware that using credit checks as a screening tool may increase the risk of a discrimination claim. Therefore, municipalities making hiring decisions must be able to show that the hiring criteria used to evaluate and screen applicants is necessary for the job in question. Given the EEOC’s recent action, municipalities are well-advised to carefully reconsider and show restraint in using credit history checks as a screening tool, whether for an individual position or as a baseline screening tool for all applicants for employment.
If you have questions about employment screening techniques or labor matters in general, please contact either Sheralee Hurwitz at 616-726-2239 or any member of the Foster Swift Administrative & Municipal Team.