Use of Applicants' Credit Histories During Background Check Did Not Discriminate Against African-Americans

In EEOC v. Kaplan, the EEOC alleged that Kaplan racially discriminated against African-American applicants because its use of credit histories as part of its background check process had a disparate impact on them. Kaplan is an educational institution that offers undergraduate and graduate degrees.Kaplan acquires credit history information of applicants who, among other things, are applying for positions related to the administration ofits financial aid program because those employees have access to the personal financial information of its students and handle financial aid payments to students. It started this practice because, several years ago, some employees misappropriated financial aid payments intended for students. The District Court rejected the EEOC's claims andtheSixth Circuit Court of Appeals affirmed the District's Court decision. First, the Court found it incredulous that the EEOC would seek to invalidate Kaplan's use of credit histories because, as Kaplan discovered during the litigation, the EEOC itself uses credit checks as part of its hiring process for the same reasons as Kaplan:"In this case, the EEOC sued defendants for using the same type of background checks that the EEOC itself uses." Second, the Court rejected the EEOC's expert's report, finding that it was not admissible under applicable federal rules because, among other things, the expert relied on a visual determination of the applicants' race by looking at their drivers' licenses. In this vein, the Court noted that the EEOC itself discourages employers from making visual determinations of an employee's race yet that was its expert's primary method of identifying the race of applicants. Third, the Court concluded that the expert's sample of Kaplan's applicant pool was not representative of Kaplan's actual applicant pool and, therefore, was inherently unreliable. The Court's concluding paragraphsums up its overall assessment of the EEOC's case: "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." This case -- and the strong language employed by the Courtin rejecting the EEOC's claims -- shouldsignificantly aid efforts by employers to defend themselveswhen facing similarclaims. In particular, employers should consider - as Kaplan didin this case - conducting discovery on the EEOC's own employment practices.While not the basis ofits ruling,a reading ofthe opinion makes clear thatthe Court found the EEOC's claims to behypocriticalgiven that it alsouses credit historiesin the hiring process for the same reasons as Kaplan and, as a result,viewed the EEOC's claims with skepticism from the outset.