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Credit Checks in Employment: Where Employers Stand After Kaplan

The EEOC and some state and local governments became concerned with employers’ use of credit checks following the 2008 economic crisis. Many people found themselves out of work, negatively affecting credit scores. Government officials worried that employers placed too much emphasis on credit checks to screen out otherwise qualified applicants. Their concern is that minority workers are more likely to have poor credit. Employers’ overreliance on credit scores as a hiring criterion therefore could have a disparate impact on minority applicants. Even when an employer has a policy that applies to all applicants or workers, the policy may be the basis for a claim of unlawful discrimination. Actionable discrimination may be found if the policy disproportionally affects a protected class of employees, and the employer cannot demonstrate a sufficiently important business need for the policy. In EEOC v. Kaplan Higher Education Corp., the EEOC alleged that Kaplan’s use of credit checks had a disparate impact on African American job applicants, however the EEOC was unable to produce disparate impact evidence. The court entered summary judgment in Kaplan’s favor.

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