Guess What? The EEOC Does the Same Thing It Tells Employers Not to Do

In a poignant example of the pot calling the kettle black, the Sixth Circuit Court of Appeals recently rejected the EEOC’s argument that an employer’s use of credit checks for hiring caused a disparate impact, pointing out that the EEOC does the exact same thing.

The first sentence in the court’s opinion in EEOC v. Kaplan Higher Education Corp. says it all: “In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses.” No. 13-3408 (6th Cir., Apr. 9, 2014). The opinion goes on to describe how the EEOC’s personnel handbook recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations,” and how because of that concern, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions. Nevertheless, the EEOC sued an employer, arguing that the employer’s use of credit checks for hiring had a disparate impact in violation of Title VII.

In rejecting the EEOC’s claim, the court held that the expert witness testimony offered by the EEOC to prove that a disparate impact occurred was unreliable and admissible. First, the expert’s methodology did not meet the requirements of Federal Rule of Evidence 702 because it relied on an untested methodology and was not peer-reviewed. Second, the expert admitted that his results were not based on a statistically representative sample size. Without admissible expert testimony to prove a disparate impact based on race, the court concluded that the EEOC could not prove its claim of disparate impact discrimination.

Takeaway: The Kaplan decision suggests that the EEOC may have an uphill battle in proving that an employer’s reliance on credit checks for hiring results in a disparate impact, particularly given the EEOC’s own policies on the subject. However, the EEOC may one day succeed in finding a reliable expert with a tested methodology to prove this type of claim. Therefore, it’s a good idea for employers to continue to use credit checks for hiring only when doing so is defensible as a matter of business necessity.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on April 23, 2014, in Discrimination and Harassment and tagged . Bookmark the permalink. Leave a comment.

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