Credit, Education and EEOC — Tip of the Week

The EEOC has disclosed two informal discussion letters about how two common hiring practices could subject employers to claims of discrimination. The first letter concerns the use of credit checks as a tool for making hiring decisions.

According to the EEOC, Title VII of the Civil Rights Act prohibits an employment practice that disproportionately screens out racial minorities, women, or other protected classes  unless the practice is job-related and consistent with business necessity. If credits checks disproportionately exclude African-American or Hispanic applicants, for example, their use could be unlawful unless the employer can establish that the practice is needed for it to operate safely or efficiently.

The EEOC frowns on the use of credit checks because they haven’t been shown to be a valid measure of job performance. However, courts have determined that credit checks are appropriate for certain jobs, such as where an employee handles large amounts of cash.

The second letter addresses whether requiring a masters degree for a particular job, without the possibility of counting experience or other education instead, would violate Title VII. The EEOC says yes — if the masters degree requirement is strictly applied and has a disproportionate impact on any protected class. The EEOC advises that should this result occur, an employer needs to determine if there is an equally effective alternative selection procedure that has less adverse impact.

As a result of these letters, employers should review their use of credit checks and education requirements and obtain advice from labor and employment counsel.