EEOC Files Lawsuit Against Discrimination Based on Credit Reports and Criminal Records

If your criminal record or credit history has resulted in your not getting a job, you may have been the victim of unlawful discrimination.

When people think of workplace discrimination they tend to think of instances of intentional discrimination – for example being passed over for promotion because your boss does not like your ethnic background or being fired because of your disability. This type of intentional discrimination is known as disparate treatment discrimination.

Another, less frequently litigated, form of discrimination is known as disparate impact discrimination (some people also call it “adverse impact discrimination”). Disparate impact discrimination involves a facially neutral employment practice that has a disparate impact on different groups. So, for example, if an employer has a policy that its employees be able to lift at least fifty pounds, that policy is nondiscriminatory on its face but may have an adverse effect if fewer female than male employees are able to lift fifty pounds.

Once a litigant has demonstrated that a nondiscriminatory employment policy has a disparate impact on different groups, an employer has to show that its policy is job-related (e.g., in this particular part of the construction industry being able to lift 50 pounds is essential for most tasks). However even if an employer succeeds in showing that its policy is job-related, the policy is vulnerable if less discriminatory alternatives would also work.

Griggs v. Duke Power Co., 401 U.S. 424 (1971), the Supreme Court case that first held disparate impact discrimination to be illegal provides a good illustration of disparate impact litigation. In Griggs, a power company used some (supposed) intelligence tests to determine eligibility for promotion. These tests turned out to have a racial bias to them that resulted in white employees having, on average, higher scores.

Because of the disparity in these test scores and because Duke Power could not show that the tests were job-related (e.g., they could not show any correlation between scores on IQ tests and ability in repairing power lines), the Supreme Court struck down the practice.

Employers soon smartened up and abandoned crude so-called intelligence tests that had no relation to what an employee did in his day-to-day work.

Today, however, more employers than ever are using credit reports and criminal background checks as part of the application process. Often these facially neutral policies regarding criminal background checks and credit checks have a disparate impact on minority employees. And it’s difficult to see their job-relatedness, especially in light of social science data that, five years after a conviction, a so-called convict has the same chance of reoffending as anyone else – even someone with no prior record.

As part of generally stepping up its enforcement activities under President Obama, the Equal Employment Opportunity Commission (EEOC), has begun to attack employers’ use of criminal records and credit scores. In October, the Equal Employment Opportunity Commission (EEOC) filed a lawsuit against The Freeman Companies, a convention conglomerate, seeking to challenge Freeman’s policy of basing hiring decisions in part on the basis of credit scores and criminal records:

The Freeman case could turn out to be an important victory for employees. It could also be a big step in making employment decisions more rational.