Are Credit Checks Unfair Employment Discrimination?

October 26, 2010

In this economic environment, employers are frequently looking for ways to narrow down applicants and screen out potential problems based on clear and specific criteria.  For many employers, one way of doing that is to review the applicants’ credit history.  However, this method is under attack.  According to the Wall Street Journal:

“Four states have passed laws in the past three years that limit the practice, and similar bills have been introduced in 20 other states and Congress. The issue has surfaced in the wake of the recession, which has left many unemployed workers with tattered credit.

“The underlying concern is that poor credit could become a barrier to landing a job. Employers contend credit checks help them evaluate candidates and protect against fraud.

“Another concern is the potential discriminatory impact on hiring. That prompted the Equal Employment Opportunity Commission to hold a hearing Wednesday to listen to testimony from advocates on both sides of the issue.

“Opponents of the practice cite studies showing that African-Americans and Latinos tend to have lower credit scores. They also dispute whether credit reports are an accurate way to measure an employee’s qualifications. An early 2000s study by Jerry Palmer, an Eastern Kentucky University psychology professor, showed that bad credit was a poor predictor of job performance.

When screening job applicants, it is important to be aware of your state’s specific restrictions, as well as federal laws.  Many criteria that an employer may not think of as discriminatory may be looked at differently under the applicable law.  Additionally, it is important to constantly review the criteria being used in order to ensure that it is relevant to the characteristics that you are seeking in an employee.  The constantly changing legal landscape requires frequent reviews to ensure that hiring practices are appropriate under the law. 

If you have any questions about your hiring practices or other potential employment discrimination issues, please contact Maucere Law Group LLC for guidance.

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