Phi Beta Cons

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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