Tuesday, April 6, 2010

States’ actions in barring credit checks on job seekers not all employers need to consider

In a down economy, workers are struggling not only to find and keep jobs, but also to keep current with their bill payments. In light of these circumstances, the state of Oregon has recently enacted a law that will make it an unlawful employment practice, beginning July 1, 2010, to obtain or use for employment purposes information contained in the credit history of an applicant for employment or an employee, or to refuse to hire, discharge, demote, suspend, retaliate or otherwise discriminate against an applicant or an employee with regard to promotion, compensation, or the terms, conditions or privileges of employment based on information in the job applicant or employee's credit history. Senate Bill 1045, signed by Governor Ted Kulongosky on March 29, has limited exceptions for financial institutions, public safety offices, and other employment if credit history is job-related and such use is disclosed to the applicant or employee. Aggrieved employees and job applicants may file a complaint with the Commissioner of the Bureau of Labor of file a civil action for relief. Hawaii and Washington state have similar laws in place, and several other states are considering such laws.

But state laws are not the only thing employers need to worry about when it comes to checking the credit history of job seekers and employees, as a recent EEOC informal advisory letter points out. Although none of the laws enforced by the EEOC directly prohibit discrimination based on credit information, such federal laws may be implicated in some circumstances, explains Assistant Legal Counsel Dianna B. Johnston in the letter. For example, if an employer's use of credit information disproportionately excludes African-American and Hispanic candidates, the practice would violate Title VII unless the employer could establish that the practice is needed for it to operate safely or efficiently.
In the March 9, 2010, letter, Johnston cited the testimony of attorney Adam Klein at an EEOC Commission meeting in May 2007 on employment testing and screening, that credit checks have not been shown to be a valid measure of job performance. However, Johnston noted that some courts have determined that credit checks are appropriate for certain positions, such as where an employee handles large amounts of cash.

A 2008 EEOC fact sheet on employment tests and selection procedures offers additional guidance. It lists credit checks among the common types of tests and selection procedures used by employers. Other tests and selection procedures on the list include cognitive tests, personality tests, medical examinations, and criminal background checks. The document also focuses on "best practices" for employers to follow when using employment tests and other screening devices.

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