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EEOC put in time-out by district court


By Gina Helou

The Equal Employment Opportunity Commission (EEOC) lost a battle against an employer where the federal agency brought an employment discrimination action alleging the employer’s practice of requiring background checks for applicants had a disparate impact on minorities.  A successful disparate impact claim would require the EEOC to show a certain employment practices  were discriminatory because  they had an adverse impact on members of a minority group, or protected class, more-so than on non-members of protected classes.  In this action, an Ohio federal district court dismissed the EEOC’s complaint stating the agency did not prove the employer’s practices had a “disproportionately negative impact” on a protected class under Title VII of the Civil Rights Act of 1964 (“Title VII”).

The employer was an educational institution that received student loan money from the Department of Education to be distributed to students through the employer’s financial aid department.  In the past, the employer had instances where business officers misappropriated the funds meant to go to the students.  To solve that problem, the employer implemented a business practice of running credit history reports on its applicants.  The report provided the employer with information on whether potential employees were under “financial stress or burdens” that could affect the employees’ ethical obligations as they applied to specific job duties – distributed federal student aid.

The employer hired a third-party to run the applicants’ credit histories and provided the third-party with several check points to review for each applicant, such as whether the application social security number matched with the credit bureau records; if the individual had ever filed for bankruptcy; if there wereoverdue child support payments; or any outstanding civil judgments or tax liens.  If these issues appeared on a credit report, the third-party would advise the employer, but it would not provide the employer with the race of the “flagged” applicant.  The EEOC claimed that this practice was discriminatory because it had a disparate impact on African-Americans.  

Interestingly, in the court’s overview of the case’s background and facts, it took a moment to comment on the EEOC’s hiring practices.  The court noted the federal agency also ran credit checks on its applicants.  These credit checks were required for almost 90% of the positions and departments within the EEOC.  The EEOC’s handbook expressly stated the credit checks were necessary because they revealed that “overdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.”

Legal Analysis
To get the action dismissed prior to trial, the employer had to provide that no genuine issue of material fact existed.  The EEOC then had to prove that it met all of the legal requirements to show the employer’s credit history background checks constituted employment discrimination through disparate impact and therefore violated Title VII.  The EEOC hired several experts, or “race-raters,” in an attempt to show that by looking at photographs and names, an individual could determine the applicant’s race.  The court said this method was not credible because it did not meet the level of reliability that is required for admittance of scientific expert testimony. Moreover, the court noted the experts could not even reach an 80% consensus as to the race of 11.7% of the applicants.  The lack of a connection between the employment practice and its potential to be discriminatory against African Americans was radical enough to convince the court a dismissal in favor of the employer was in order.  Not to mention, the court’s brief segue where it described the EEOC’s hiring practices to be exactly the same as the employer’s in the present case.

The EEOC plans to focus on certain employment discrimination issues, such as systemic discrimination, through its new strategic enforcement plan for the 2013 to 2016 fiscal years.  This means the agency is cracking down on employers and looking at charges with much more scrutiny.  The EEOC may have only lost a battle, though, as this case is still appealable before the Sixth Circuit, which historically has been neither pro-EEOC nor pro-defendant when it comes to equal employment opportunity issues.  Even so, this ruling implies that the courts are going to make the EEOC conduct much more detailed investigations to satisfy the agency’s intentions under its strategic enforcement plan.

Read the case here.


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