Recent Equal Employment Opportunity Commission (“EEOC”) initiatives are focused on eradicating what the EEOC views as more covert forms of discrimination, such as policies that exclude applicants with bad credit reports or criminal convictions. In light of this new scrutiny, employers who conduct credit or criminal background checks should make sure that their practices do not give rise to claims of “disparate impact” discrimination by members of protected classes.
EEOC Guidance on Criminal Background Checks
EEOC guidance provides that a blanket exclusion of individuals from employment due to a criminal record violates Title VII of the Civil Rights Act of 1964, unless the policy is consistent with business necessity or otherwise required by law. The EEOC has previously found that employment decisions based on this type of criteria disproportionately exclude African-American and Hispanic applicants. As a result, the EEOC has also stated that employers should not consider arrests, but only convictions.
If an applicant is excluded from employment because of a previous conviction, the EEOC calls for consideration of three factors: (1) the nature and gravity of the offense; (2) the time that has passed since the conviction and/or completion of the sentence; and (3) the nature of the job held or sought.
Use of Credit Information in Employment Decisions
The EEOC is also evaluating the common hiring practice of checking the credit history of applicants. In October of 2010, the EEOC held a public Commission meeting on the use of credit histories in the employment selection process. At this meeting, representatives of civil rights groups cited studies showing racial minorities and women tended to have lower credit scores than non-Hispanic white males. These groups emphasized studies that show little correlation between “bad credit” and job performance. Thus, a blanket exclusion of applicants with “bad credit” may have a disparate impact on protected groups, without being justified by business necessity. This would violate Title VII.
Employer representatives emphasized the use of credit histories as part of mandatory background checks for jobs that involve access to customer and company money. These same speakers noted that credit reporting agencies do not reveal actual credit scores to potential employers, but rather a narrative of the individual’s credit history. Finally, proponents of credit checks argued that no research has shown a relationship between use of credit reports and a disparate impact on minority job opportunities. The statements of the panelists at the October 2010 Commission meeting, along with their biographies, can be found on the EEOC’s website. http://www.eeoc.gov/eeoc/meetings/10-20-10/index.cfm
While the EEOC has no immediate plan of action on these issues, it reiterated that employers should ensure that any use of credit history in the employment process be entirely job-related.
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