Did You Know That . . . ?

More and more states are making it illegal for employers to make hiring decisions based on a job applicant’s credit history. Several states, including Hawaii, Illinois, Washington and Oregon, have banned the practice or severely limited it. Other states are considering similar laws.

About half of all large private employers reportedly use credit histories in making hiring decisions. Critics of the practice say that many people who have lost their jobs due to no fault of their own – and have for this reason been unable to pay their bills – are being unfairly kept out of work.

Just last week, the federal Equal Employment Opportunity Commission (“EEOC”) sued Kaplan Education Corporation in Cleveland federal court seeking a permanent halt to the practice, which statistics show hurts Blacks more than others. Kaplan Education Corporation denies any wrongdoing.

The courts generally look at two different factors in deciding if the practice is legal or illegal: (1) is there a logical connection between the job being interviewed for and an applicant’s credit-worthiness? If no, the practice would seem to have another motive, possibly illegal; (2) Are certain groups of people affected more than other groups? If yes, the practice would seem discriminatory, and thus illegal.

With so many people out of work and unable to pay bills and mortgages, look for this to be an increasingly common topic in employment disputes.

© 2011 Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.