Close on the heels of the EEOC’s October 20, 2010, public meeting on the use of credit checks by employers, Loudy Appolon filed a putative class action against the University of Miami and the Leonard M. Miller School of Medicine alleging that the schools utilized credit checks in a manner that discriminates against African American and Latino applicants.

The complaint alleges that in 2009, Appolon, an African American, applied for a senior medical collector position with the University of Miami, Miller School of Medicine. She received a conditional offer of employment, contingent on a background check. Prior to beginning her employment — but after she quit her employment with North Shore Medical Center — the University withdrew its offer of employment as a result of her credit report. The credit report on which the University relied contained errors. Appolon corrected the errors with the credit reporting agencies. She also attempted to notify the University of the errors to no avail. According to Appolon, the corrected report showed she had no active credit problems or other problems relevant to the senior medical collector position.

Appolon bases her putative class action on the premise that the University’s use of credit reports in hiring disparately impacts African American and Latino applicants. She postulates that African Americans and Latinos suffer more economic hardships that adversely impact credit ratings, such as job losses and health-related bankruptcies, and that these economic hardships result in significantly lower credit ratings. Hence, Appolon contends that the use of credit reports discriminates against African Americans and Latinos.

Yet, as detailed in our blog post on the EEOC’s public meeting in October, there is a dearth of reliable studies bearing on whether use of credit history in employment decisions has an adverse impact on African Americans or Latinos. Participants at the EEOC’s public meeting noted that African Americans and Latinos do tend to have lower credit scores than Caucasians. However, employers do not receive credit scores as part of a credit history check. Consequently, studies that focus on disparities in credit scores have little to no utility when evaluating whether employers’ use of credit history has a disparate impact on these protected classes.

Appolon further postulates that credit backgrounds do not accurately predict job performance or workplace crime. She alleges that reliance on such information, therefore, is discriminatory because it is not job-related. However, participants at the EEOC meeting also addressed the lack of evidence on this point. Indeed, the meeting participants could not point to a single study that proved or disproved a link between poor credit history and poor job performance and/or workplace crime.

Even in light of the uncertainty over whether the use of credit history reports actually disproportionately impacts any protected class(es), employers should expect that Appolon’s lawsuit will be the first of many. The EEOC has strongly suggested that it will scrutinize the use of credit history reports by employers. Plaintiffs class action lawyers likely will be following Apollon’s counsel in response to this not-so-subtle cue. Accordingly, employers should re-evaluate their use of credit history in employment decisions to ensure that they are in the best possible position to defend against this next anticipated wave of employment litigation.

This entry was written by Katherine Dix.

Photo credit: contour99