EEOC has recently intensified its scrutiny of seemingly neutral employment criteria, such as policies that exclude those with bad credit or criminal convictions, which often have a disparate impact on protected groups.
EEOC policy states that a blanket exclusion of individuals from employment due to a criminal record violates Title VII of the Civil Rights Act of 1964, unless the policy is consistent with business necessity or required by law. EEOC examined the use of credit histories of job applicants in the employment selection process at a recently held public Commission meeting.
What Does the Work Psychology Research Say?
These methods lack validity
Most people assume that applicants with a criminal background or poor credit history will be worse employees than those without such background characteristics. However, a number of authors have shown that there is virtually no evidence to support this assumption(1).
There are only a few peer-reviewed studies that have directly examined the validity of credit history information or criminal background information as predictors of job relevant criteria. Palmer and Koppes(2) concluded that credit history has no validity in predicting employee performance measures. They also concluded that no published empirical evidence for the criterion validity of credit history exists(3).
These methods have adverse impact against Black and Hispanic candidates
Arnoldy(4) notes the likelihood that Black and Hispanic candidates will have less favorable credit histories than their White counterparts. As a result, using credit history as a basis to exclude applicants is likely to result in adverse impact in hiring decisions for Blacks and Hispanic candidates(5).
Similarly, research suggests that Black and Hispanic candidates will more often have unfavorable information in their criminal background checks compared to White candidates(6). Convictions are likely to discourage otherwise qualified individuals from even applying to certain jobs, which can magnify potentially discriminatory effects of different rates of conviction across racial and ethnic groups(7).
These methods yield unreliable information
A number of authors have noted that credit reports often contain errors and inaccuracies that can lead to adverse employment outcomes(8). Neilsen and Kuhn(9) state that the majority of credit reports they examined show one or more serious mistakes.
The same is true of criminal background information which can be extremely difficult to collect and interpret. Harris and Keller(10) state that ‘although state systems are improving, record accuracy and completeness continue to be the most serious problem affecting criminal history databases.’ They also note that criminal history records are quite difficult for noncriminal agencies to interpret.
What Does This Mean for Employers?
Employers should be cautious of blanket policies that exclude applicants base on their criminal history or credit score. Where those policies exist, and employer should be ready to articulate how the policy is consistent with business necessity or required by law. Narrowly tailored policies are more likely to survive legal scrutiny than across the board bans.
Want to find out more about criminal background checks and credit reports and their use in employee selection processes? Call us or email info@landylsg.com
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References
(1) Concepcion, 2010; Desmond, 2010; Nielson & Kuhn, 2009; Moore & Moss, 2007; Gallagher, 2006; (2) Palmer and Koppes, 2003; (3) Palmer and Koppes, 2004; (4) Arnoldy, 2007; (5) Gallagher, 2006; (6) Harris & Keller, 2005; Holzer & Stoll, 2006; Levashina & Campion, 2009; (7) Harris & Keller, 2005; (8) Concepcion, 2010; Desmond, 2010; Klein, Moore & Moss, 2007; (9) Neilsen and Kuhn, 2009; (10) Harris and Keller, 2005.
