Are Pre-Employment Credit Checks Discriminatory?

Is it legal for employers to conduct credit checks as part of pre-employment screening? It’s a practice that’s done in many cases, but if not done right, it can amount to discrimination.

And in many states, it’s even a practice that’s prohibited or limited by law.

It may not seem like outright discrimination to ask for your credit history. Some might even feel that it’s a fair question. After all, what does credit history have to do with race?

There’s an aspect of racial discrimination, however, that speaks to the effect of an action instead of how an action might appear on its face.

Translation: While some actions are outright discriminatory, such as specifically making racial slurs or specifying that a job opening is for “whites only,” other actions have a hidden discriminahatory effect. That means the action may not seem overtly racist, but in the end, it targets one racial group more than others.

That’s often the case with things like credit checks and criminal background checks. Unfortunately, these checks can reveal information that is often skewed against African Americans and other minority groups. The result may be that more minorities than Caucasians are removed prematurely from employment consideration based on credit checks.

So, in essence, it may be a form of hidden racial discrimination.

The Equal Employment and Opportunity Commission has issued an opinion on this. Credit checks are frowned upon by the EEOC unless necessary to operate safely or efficiently.

In Pennsylvania, a proposed law would limit credit checks in pre-employment screenings to very few instances.

Under a pending Pennsylvania bill, it would be discriminatory for an employer to require a credit check unless the report is substantially related to the employee’s job, the report is required by law or the job is with the Office of the Attorney General, State Police or other law enforcement agency.

In New Jersey, a similar bill is under consideration. The state Senate passed the bill earlier this year, but it has not yet been voted on in the House, New Jersey’s 101.5 radio reports.

Related Resources:

• Philadelphia Employment Lawyers (FindLaw)
• Philadelphia Ranked Among Top Cities for LGBT Policies (FindLaw’s Philadelphia Employment Law News)
• Background Checks Can Help Prevent Negligent Hiring Lawsuits (FindLaw’s Philadelphia Employment Law News)