In a harsh rebuke of the Equal Employment Opportunity Commission’s method of attempting to prove that Kaplan Higher Education Corp.’s consideration of credit history for hiring in select positions was discriminatory, the Sixth Circuit, only three weeks after oral argument, issued a decision upholding the federal district court’s order excluding the EEOC’s expert opinion from evidence and dismissing the EEOC’s case. 

The first sentence of the court’s opinion pretty much tells the EEOC all it needs to know: 

“In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses.”

Indeed, the EEOC alleged that Kaplan’s use of credit checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact that violates Title VII. Yet, according to the court, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions.

In attempting to prove that Kaplan’s use of credit checks to screen applicants for certain positions, including those that provide access to student financial loan information, created an unlawful disparate impact, the EEOC relied on statistical data compiled by Kevin Murphy, who apparently holds a doctorate in industrial and organizational psychology. Like the district court, the Sixth Circuit was not impressed with the reliability of Murphy’s methodology. This time, the last paragraph of the court’s opinion speaks volumes:

The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself. The district court did not abuse its discretion in excluding Murphy’s testimony.

So, it looks like it is back to the drawing board for the EEOC on its quest to eliminate the use of credit history checks from the hiring process. It is hard to understand, however, how the EEOC can continue to justify its targeting of credit history checks when it uses them itself for the same reasons that businesses use them. It will be interesting to see whether the EEOC revises its own practices in the near future as it continues to pursue this type of litigation in other federal courts. 

Undoubtedly, the EEOC will need to revise its litigation strategy in those cases because it does not appear that the methods used by and opinions of Murphy will survive to fight on. While its goal of eliminating systemic discrimination is laudatory, the EEOC needs to ensure that the methods it uses to identify criteria that discriminate are reliable. Regardless, employers that use credit history checks to screen applicants for employment must recognize that the EEOC’s radar is on them and that should use credit history checks only when the positions for which application is sought justifies this kind of scrutiny.

Brian Hall is a partner at Porter Wright Morris & Arthur LLP, where he helps companies effectively manage their full range of workforce issues. Hall is also editor of the firm’s Employer Law Report.

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