EEOC vs. Kaplan

The Equal Employment Opportunity Commission has sued the Kaplan Higher Education Corporation for using credit history in its hiring process. The New York Times has the story:

Since at least January 2008, the commission asserted in the lawsuit, Kaplan has rejected job applicants based on their credit history, with a “significant disparate impact” on blacks.

“This practice has an unlawful discriminatory impact because of race and is neither job-related nor justified by business necessity,” the commission said. Kaplan, which is owned by the Washington Post Company, operates a chain of for-profit colleges and training schools.

“Disparate impact” is, of course, the theory that if a given test or criterion rules out a higher proportion of applicants from one race than from another — which almost any test or criterion will, given racial gaps in skills and abilities — it’s presumed illegal unless the company can prove it’s “job-related.” And “job-related” doesn’t just mean “significantly correlated with job performance” — IQ tests are a no-no, even though they predict one’s ability to perform a wide range of tasks.

Earlier this year, Megan McArdle had an interesting post about why employers use credit scores. One plausible answer: The federal government has already banned all the other metrics on antidiscrimination grounds.

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