Wednesday, December 21, 2011

"Good Credit Only" Hiring Policies

Employers’ use of credit checks to screen job applicants is wide spread. A 2010 survey by the Society for Human Resource Management found that 60% of employers now check the credit of at least some applicants. Those candidates receiving poor credit scores are not hired. Employers who use credit checks maintain that how a person has handled his financial responsibilities is relevant to how they will perform in the job. They believe that someone having financial difficulties is more inclined to engage in risky behavior, such as stealing from the company.

Consumer advocates and others opposed to employers using credit checks to screen applicants, argue it leaves those who desperately need a job in dire circumstances. Once someone loses their job and is unable to pay their bills, their credit score plummets. This poor credit leaves them unable to find new work. As they slide deeper into debt, employers find them even less desirable and they are entrenched in circumstances from which they may never escape. Those opposed to using credit scores as a hiring screening tool, say it unfairly penalizes minorities; arguing there is no correlation between an individual’s credit score and their character or any job performance, and that credit reports are unreliable.

While using credit scores in making hiring decisions is not necessarily illegal, employers need to be careful. In some cases, credits checks can be found to be illegal if they have a disproportionate affect on minorities and other protected classes of workers.

As with a “no hire of those unemployed” policy, if an employer’s practice of using credit checks to select job hires is shown to have a disproportionate impact on race or another protected class, the employer must prove that using credit checks is job related and justified by business necessity. And then, even after showing a business necessity, the employer could be required to show that there was no alternative, non-discriminatory way of obtaining the same information.

A recent example of a lawsuit involving credit checks occurred in December 2010. The EEOC sued Kaplan Higher Education Corp., alleging that its use of credit history to screen job applicants discriminates against African Americans. The lawsuit alleges that Kaplan has routinely rejected job applicants because of bad credit and that this practice has an unlawful, discriminatory impact because of race, in violation of Title VII of the Civil Rights Act of 1964. The EEOC maintains the job practice is “neither job related nor justified by business necessity.” The case is currently being litigated.


References:


“Credit History: Is it any of your employer’s business?” The Rights Stuff Newsletter, Winter 2011. http://www.humanrights.state.mn.us/education/articles/rs11_1credit.html


“EEOC Files Nationwide Hiring Discrimination Lawsuit Against Kaplan Higher Education Corporation.” December 21, 2011. http://www.eeoc.gov/eeoc/newsroom/release/12-21-10a.cfm


Goldfarb, Zachary A. “EEOC suing Kaplan over alleged racial discrimination.” The Washington Post. December 22, 2010. http://www.washingtonpost.com/wp-dyn/content/article/2010/12/21/AR2010122105136.html

"Must Be Currently Employed" Hiring Policies

Millions of Americans are out of work. The national unemployment rate was 8.5% in November 2011. This number does not include the millions of unemployed workers who have simply given up looking for work.

Adding insult to jobseekers, is a growing trend among employers to refuse to hire unemployed workers. Advertisements seeking positions as varied as electrical engineers, restaurant managers, and mortgage underwriters have contained caveats that only currently employed candidates will be considered. Employers use this requirement as a way to distinguish among the many applicants in this economy. Employers theorize that individuals who kept their jobs during the economic recession must be good employees and anyone who did not must be bad. Employers worry that people who are out of the workforce have outdated skills or are poor performers. However, such reasoning does not take into account the myriad of reasons someone may be out of work. During the recession, companies let employees go for reasons that had nothing to do with their skills or work quality. They were likely victims of cost-costing measures, poor management choices, or their company simply failed.

On February 16, 2011, the EEOC (Equal Employment Opportunity Commission) held a public meeting to examine the impact of employers considering only those currently employed for job vacancies. While the unemployed are not a protected class under anti-discrimination laws, an employer’s policy of not hiring anyone that is not current employed, can have a disparate impact on racial minorities, individuals with disabilities, women, and older persons. That is, this seemingly non-discriminatory process of selecting job candidates can have an unintentional, discriminatory effect on protected classes of persons.

Employers should be cautious if using such a policy. If it is shown that the facially neutral policy has a disparate impact on a protected class of persons, the employer must prove the policy is job related and consistent with business necessity. That is, the employer must show that being employed is a necessary qualification for the job. Even if the employer can prove that this is true, the employer may still be liable for using such a policy if the employer refuses to adopt an alternative employment practice that has a less disparate impact and serves the employer’s legitimate business needs.


References:


Hunsinger, Dana. “Long-term unemployed face stigmas in job search.” USA Today. January 23, 2011. http://www.usatoday.com/money/economy/employment/2011-01-23-longterm-unemployed_N.htm


“Out of Work? Out of Luck: EEOC Examines Employers’ Treatment of Unemployed Job Applicants at Hearing.” February 16, 2011. http://www.eeoc.gov/eeoc/newsroom/release/2-16-11.cfm


“Businesses Refuse to Hire Unemployed, EEOC says.” Findlaw. February 19, 2011. http://blog.lawinfo.com/2011/02/18/businesses-refuse-to-hire-unemployed-eeoc-says/


“Firms refusing to hire unemployed, commission told.” Arizona Daily Star. February 17, 2011. http://azstarnet.com/business/local/article_fc59c0d1-b2af-5b7b-a305-2579d955d7c6.html