In recent weeks, employers’ use of credit checks as a pre-employment screening tool has been challenged in a number of ways. In late December, the Equal Employment Opportunity Commission filed a lawsuit against Kaplan Higher Education Corporation alleging that its rejection of applicants during the hiring process on the basis of their credit history had an unlawful discriminatory impact on African Americans and Latinos. The lawsuit came on the heels of the EEOC’s public hearing in October 2010, during which the EEOC heard testimony contending that the use of credit history as an employment screening device may have a discriminatory impact on minority groups who typically have poorer credit histories. Coupled with the EEOC’s focus on pursuing systemic discrimination lawsuits, we may see the EEOC take aim at more employers’ use of credit reports in 2011.

State legislatures are also seeking to curtail employers’ use of applicants’ credit histories. The Illinois Employee Credit Privacy Act, which became effective on January 1, 2011, prohibits, with some exceptions, the use of an employee’s credit history as a basis for hiring, firing, termination, promotion, or other employment-related decisions. (For more detail regarding the Illinois law, please see the article “Beware of the Newly Enacted Illinois Employee Credit Privacy Act.”) Legislation has also been introduced in Maryland, New Jersey, and New York that would curb the use of credit checks on prospective or current employees. Not to be left out, legislation was reintroduced in Congress in late January that would limit the use of credit checks in employment screening.

With the heightened focus brought about by the EEOC and legislative activity, it should come as no surprise that the plaintiffs’ bar recently joined the fray. In late November 2010, a class action lawsuit was filed in the Southern District of Florida against a major university alleging that the school’s rejection of African American and Latino job applicants based solely on their credit history discriminated against them under Title VII of the Civil Rights Act ("Title VII").

For a list of actions employers should take to protect themselves if they use credit checks in the hiring process, see EpsteinBeckerGreen’s Act Now Advisory entitled “EEOC Plans to Target Employer Use of Credit Information in Hiring and Other Employment Decisions.”