Employer Credit Checks | The Good, the Bad, & the Ugly

Employer Credit Checks Under Fire

In this time of high unemployment, the steps employers take to investigate candidates are being scrutinized more then ever. The Ban the Box law in Massachusetts prohibits employers from asking candidates about their criminal history on the initial written job application.  Pre-employment credit checks are also being scrutinized. As of now, Hawaii, Washington, and Oregon have laws prohibiting the employer from performing a credit check on candidates, with limited exceptions.  Many more states are also introducing similar legislation. The EEOC discourages employers from performing credit checks due to adverse impact on minorities and females, unless the candidate’s credit history is directly related to the particular job. The recession brings this issue to light, as many people looking for work may also have a tarnished credit history due to falling upon hard times. The EEOC held a public meeting last week to allow supporters from both sides of the issue to present their view. See the EEOC press release.

Those against performing pre-employment credit checks say that the practice is harmful and unfair to workers. It negatively affects those with poor credit, and statistically, minorities and females tend to have lower credit ratings, which can make a discriminatory impact on hiring. It also poses a “catch 22” for those with poor credit who need a job to to improve their credit.

Those in favor of performing credit checks say that most employers do not check credit history for every single position, the credit check is one of many tools to screen candidates, and helps to protect the company against fraud.

As an employer, if you currently use credit history to make employment decisions, best practices are to first determine if it’s necessary to check credit for every position, and then document why it is necessary for those positions.

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