EEOC vs Kaplan: Appeals Court Rules against the EEOC
In a move that employers who rely on background checks in hiring can appreciate, on April 9, 2014, the U.S. Court of Appeals for the Sixth Circuit issued a unanimous summary judgment in favor of Kaplan Higher Education Corporation, ruling against the EEOC. Some background on the case:
In December 2010, the EEOC filed a lawsuit that alleged Kaplan’s credit checks, used in its hiring process, screened out more African-American than white applicants, causing a disparate impact in violation of Title VII of the Civil Rights Act of 1964. Key testimony used in the case was from an EEOC expert witness who used analytical methods that the judge deemed unreliable. And the EEOC’s case was dismissed.
The EEOC decided to appeal the case. In its ruling a few days ago, the Sixth Circuit affirmed the opinion of the U.S. District Court in the Northern District of Ohio. In addition to upholding that the analytical methods were unreliable, in the court's opinion statement, Judge Kethledge wrote:
“In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses. The EEOC’s personnel handbook recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” Because of that concern, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions. The defendants (collectively, “Kaplan”) have the same concern; and thus Kaplan runs credit checks on applicants for positions that provide access to students’ financial-loan information, among other positions. For that practice, the EEOC sued Kaplan.”
Employers should appreciate the rulings on this case for two reasons. First, it shows that the courts are not on board with the hypocrisy of a government entity suing a private employer for a practice that it itself uses. And second, it demonstrates that when a lawsuit is brought to court, the methodology used to prove the allegations must be reliable, not just something developed specifically for the purposes of litigation.
While this is good news for employers, other litigation against employers by the EEOC regarding the use of criminal background checks is still pending. It’s important to continue to monitor the progress and results of these cases.