Avoid Lawsuits, Avoid Credit Checking Applicants

By Brendan B. Read, Senior Contributing Editor  |  March 01, 2011

This article originally appeared in the March 2011 issue of Customer Interaction Solutions

While there is little likelihood of major new laws and regulations coming down from the conservative-swaying Congress and state houses, the Obama Administration and many of its state counterparts have given notice that they will enforce existing ones to the max. And that includes regulations impacting on employment.

The case in point is credit checks for job applicants. The U.S. Equal Employment Opportunity Commission (EEOC) announced on December 21 that it was filing suit against Kaplan Higher Education Corporation under Title VII of the Civil Rights Act of 1964. The commission says it is a violation of the act “to use hiring practices that have a discriminatory impact because of race and that are not job-related and justified by business necessity”.

“Title VII of the Civil Rights Act of 1964 was intended to eliminate practices that serve as arbitrary barriers to employment because of a job applicant’s race,” said Regional Attorney Debra Lawrence of the EEOC’s Philadelphia District Office in a statement. “Employers need to be mindful that any hiring practice be job-related and not screen out groups of people, even if it does so unintentionally.”

Kaplan’s side was reported in a December 21 Bloomberg (News - Alert) article. “The company conducts background checks on all job applicants, including credit histories for those who handle financial matters,” the company said.

Kudos to the EEOC. Credit checks are the equivalent of debtors’ prisons because they punish individuals who have been struggling to survive in this tough economy and who got behind with their bills by denying them the employment that they need to pay off their debts; a Catch-22 if there ever was one. Only in rare circumstances, such as if an employee is required to be bondable, should this practice be allowed. Some law firms are raising the red flags on this issue. A January 19, 2011 blog by Sheppard Mullin, Richter and Hampton points out employers should determine “whether there is a sound business reason to obtain such information because, if it is not directly job related, it could be considered discriminatory.”

“Moreover, employers should be aware that credit checks are not always accurate indicators of a person's qualification for a particular job or a valid predictor of job performance,” adds the firm.

Sheppard Mullin points out several states–Hawaii, Illinois, Oregon and Washington–ban or severely restrict credit checks in hiring. Many more may be joining their ranks, including Connecticut, Georgia, Maine, Maryland, Michigan, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, South Carolina, Vermont and Wisconsin.

Are there grounds for credit reports for employment screens? The law firm’s blog says yes: if the employees handle “money and assets, makes fiduciary decisions or has access to private financial data.”

This last one may be the excuse for contact centers to use credit checks because many of them are handling personal financial information especially as agents are prodded to convert sales and support calls into telemarketing transactions. Yet there are a wide array of safeguards and strict standards governing and protecting data such as PCI (News - Alert)-DSS, which is backed by law in some states; Massachusetts has tough new privacy and security regulations.

And with how closely monitored every keystroke and utterance is, agents would have to be extremely stupid even if they could get access to try and get away with stealing data. There have been few instances of it happening even offshore; if this was the case there would be screaming headlines—and quick action by lawmakers.

I once worked for a publishing firm that covered commodities. One day all of the reporters and editors were herded into a room and were warned, “don’t even think of insider trading”. Enough said. No credit or other background checks, though the firm did mandate pre-hire drug testing as it was the corporate parent’s policy.

Would not a similar warning approach to contact center agents on financial information on top of the other laws and measures for contact centers be fairer, more effective and less costly than credit checks? And be less likely to get unwanted attention from the government?

If businesses want to truly avoid restrictive laws and regulations they can start apply some common sense.

Brendan B. Read is TMCnet’s Senior Contributing Editor. To read more of Brendan’s articles, please visit his columnist page.

Edited by Stefania Viscusi