Over the last couple years, the EEOC has been taking aim at companies that use credit checks as part of the application process, arguing that excluding applicants based on credit checks has a disparate impact on minority applicants.
However, on Wednesday, the U.S. Court of Appeals sitting in Ohio dealt the EEOC a significant setback. In its decision in EEOC v. Kaplan Higher Education Corp., the 6th Circuit Court of Appeals found that the EEOC’s expert witness could not be relied upon to establish discrimination because his analysis was “unreliable”. As such, the appellate court upheld the lower court’s ruling in favor of Kaplan. The appellate court’s opinion closes with a damning statement regarding the EEOC’s credit check cases: “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 [the expert’s] testimony.”
It remains to be seen whether the EEOC will heed the court’s admonition or continue to push forward. Regardless, unless and until the EEOC finds an alternate way to establish that credit checks have a disparate impact on minority applicants, the Kaplan decision gives employers a strong response to any claim that relying on credit checks constitutes discrimination.