Is the EEOC Trying to End Credit Reports on Job Candidates Entirely?

It’s no secret that both state and federal governments have been scrutinizing the practice of employment background screening like never before, and that they have been actively pursuing legislation and litigation to limit the use of this hiring tool.

Here are some examples of what has been happening:

  • Dozens of new federal and state laws that affect hiring practices, employee rights and labor relations;
  • Increased enforcement actions and lawsuits brought by the Equal Employment Opportunity Commission(EEOC) challenging the use of credit and criminal history;
  • A growing risk of discrimination charges (the EEOC received 99,947 discrimination charge filings in 2011 — the highest number in its 46-year history);
  • Legislative attempts to expand “protected class” status to the unemployed and ex-offenders;
  • An explosion of “failure to hire” lawsuits due, in part, to the tight job market and a greater number of rejected applicants;
  • An increase in lawsuits for violations of the Fair Credit Reporting Act;
  • Legal action related to the use of arrest records (PepsiCo recently lost a $3.1 million settlement related to this);
  • Costly challenges related to obtaining proper consent to conduct background checks (First Transit lost a $5.9 million settlement for failure to do so);
  • “Ban the Box” initiatives at the state and local levels;
  • New state laws restricting the use of credit reports; and,
  • The prevalence of social media and other new technologies as screening tools.

Concerns over the EEOC’s actions

Over the past couple of years, I have had the pleasure and privilege of working closely with a group of organizations and individuals determined to make sure that employers voices are being heard and that their concerns are being addressed.

I have not publicly broadcast my involvement in this group because I didn’t want to tip my hat as to strategies we were pursuing and tactics we intended to utilize along the way. And while, we have only just begun, we are at a point where our efforts are becoming more public.

The biggest issue we have been addressing lately is the EEOC’s efforts to develop new guidance on how employers should use both criminal records and credit reports. And as these issues have been coming to a boiling point over the past several months, the group decided that it was time to go on record with our concerns about EEOC’s actions and advocate on behalf of employers who use these screening tools to mitigate risk in the workplace.

This week, we held the Due Diligence, Background Checks and Employment Conference at the U.S. Chamber of Commerce in Washington D.C. This one-day symposium featured presenters and panelists that spoke directly about the need for employers to conduct criminal background checks and the role they play in protecting their employees, their customers and their businesses.

Over the next week or so, I intend to highlight some of the information that was shared at this conference. But here is one thing that is vitally important to communicate: The EEOC circulated new guidance on credit reports a couple weeks ago to their five commissioners and has fast-tracked final guidance. It could come any day now.

The end of credit checks for job candidates?

Be prepared for guidelines that will effectively end the practice of checking a job candidate’s credit report at any time during the hiring process or tenure of their employment. The burden of proof will be on the employer to demonstrate a business need.

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This is not a doomsday prediction. EEOC Commissioner Victoria Lipnic (who is largely supportive of employer’s rights on background checks) spoke at this conference and even she shared her concerns about the use of credit reports and their potential for disparate impact on minorities. If Commissioner Lipnic has reservations, it is a foregone conclusion that her colleagues will take an even stronger position against employer use.

The other thing that occurred this week is that we received word on Tuesday evening, that the EEOC has now circulated guidance about the use of criminal background checks and also expects to move quickly in this regard.

It is worth noting that the EEOC is not making this guidance available for public commentary before making a decision.

Please know that we are doing everything in our power to highlight the ramifications of the new guidance and how employers will suffer if their ability to make an informed decision is restricted.

This was originally published on EmployeeScreenIQ’s IQ Blog.


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