Frustrated job hunters sometimes call with complaints about pre-employment background checks that include credit investigations.
Some applicants who have low credit ratings believe that credit checks discriminate against them. They say their personal money troubles shouldn't have any bearing on their ability to do the job.
But credit checks are a legal and in some cases appropriate part of pre-employment investigations. And there's only a glimmer of a chance that credit checks might be considered discriminatory.
Here's why:
"Credit history is not a protected class," notes Eric Packel, an employment law attorney at Polsinelli Shalton Flanigan Suelthaus. "There are no laws prohibiting 'discrimination' against people with bad credit histories. Discrimination has to be tied to a legally protected class such as race, religion or gender."
But Packel and other employment law attorneys have seen a tiny exception to the broad-brush right of employers to reject job candidates on the grounds of poor personal money management.
That exception is in Wisconsin, where the state Department of Workforce Development prohibits discrimination on the basis of credit histories in certain instances when the applicant has a criminal conviction history.
There are several factors that must be in place before such a charge of credit discrimination might be won, but Packel said employment law attorneys are watching the Wisconsin situation to see whether it's a harbinger for other state actions.
To begin with, the Wisconsin Legislature designated convicted criminals as a protected class in respect to employment, with certain exceptions. Basically, that means an ex-con can't be denied a job solely because of his or her criminal history, unless the employer is able to show that the job duties have a substantial relationship to the elements of the crime.
For example, a bank would be able to refuse a teller job to a convicted embezzler on the grounds of the conviction, but it wouldn't be able to eliminate the candidate solely on the grounds of, say, a drunken-driving conviction.
Because Wisconsin considers convicted criminals a protected class in that employment regard, a bad credit rating for an ex-con could provide grounds for a discrimination claim if the poor credit was a reason for a job denial.
But Packel emphasized that there's yet another consideration at stake:
"The employer needs to figure out if the credit-check policy has a disparate impact that keeps a legally protected group from getting employment," Packel said.
For example, a plaintiff's attorney for a rejected job applicant could find that a company's credit-check policy overwhelmingly denies employment to single mothers with children. That opens the possibility for his single-mom client to bring a gender-based discrimination claim.
Or, for example, if the policies resulted in a disproportionate share of African-Americans being denied employment, partly because of poor credit histories, there could be a race-based discrimination claim.
Employment law attorneys are advising corporate clients to do their own disparate-impact analysis before opposing counsel or a state agency does it for them.
Meanwhile, it's a rare, rare applicant who might have a prayer of winning a credit-based discrimination claim.
Most job candidates with poor credit histories can be evaluated and rejected for that reason - and it's likely they'll never know the real reason they didn't get the job offer.
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