karpa: “an equal opportunity employer”

83

“An Equal Opportunity Employer”: Proposed Judicial and Legislative

Solutions to Restrict the Disparate Impact Caused By Employer Use of Credit

Checks

TAYLORE KARPA*

ABSTRACT

In today’s society, prospective employees are subject to many different evaluative methods by employers when applying for a job. While most methods are narrowly tailored to the goal of determining whether an applicant is adequately qualified, studies show that this cannot be said for the information provided by credit checks. This Note discusses the use of credit checks in the hiring process and argues that such use is problematic because it has a disproportionately negative effect on minorities. This Note argues that action must be taken to strictly curtail an employer’s ability to use credit information in making employment decisions. It contends that the Massachusetts legislative and judicial climates are prime for resolving this problem through litigation alleging disparate impact, a bill proposing to restrict the practice significantly, or both. In support of this argument, this Note outlines the current state of disparate impact law in Massachusetts and explains the disparate impact created by this practice.

* Candidate for Juris Doctor, New England Law | Boston (2015). B.A., magna cum laude,

Political Science, Northeastern University (2012).

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84 New England Law Review v. 49 | 83

INTRODUCTION

lthough it is a well-known “faux pas” to discuss money with strangers,1 employers have been breaking with etiquette for years by using job applicants’ credit histories to make hiring decisions.2

While most employers use methods that are narrowly tailored to the goal of evaluating prospective employees’ qualifications and characteristics,3 this cannot be said about the use of credit checks.4 Arguably, credit information does not reflect an applicant’s substantive, professional qualifications, or predict whether an applicant will be a successful employee.5 Of greatest concern is the fact that credit scores vary across racial lines, with minority groups generally having lower credit scores than non-minority groups.6 Credit checks, therefore, have a disproportionately negative impact on minority job applicants.7 As a result, this practice has caught the eye of the Massachusetts legal community and efforts have been made to ameliorate this issue through increased awareness and proposed legislation.8 These efforts focus on eliminating the discriminatory effect of credit history on potential employees.9

This Note argues that this practice is problematic because it disproportionately excludes minorities from being hired. Affirmative action must be taken to greatly restrict an employer’s ability to use credit information when making employment decisions. The Massachusetts legislative and judicial climates are prime for resolving this problem by either litigation alleging disparate impact, a bill proposing to restrict the practice significantly, or both. This argument is supported by the current state of the law on disparate impact in Massachusetts, statistical information demonstrating the distribution of credit ratings between minority and non-minority groups, and information on employers’ general hiring practices.

1 See Stacey Bradford, Money and Manners: Are You Offensive?, CBS MONEY WATCH (Sept. 13,

2010, 1:24 PM), http://www.cbsnews.com/news/money-and-manners-are-you-offensive/. 2 See infra Part I.A. 3 See infra Part I.A. 4 See infra Part I.C.1. 5 See infra Part I.C.2. 6 See infra Part I.C.1. 7 See infra Part I.C. This problem is exacerbated by the recent economic recession: loss of

employment or inability to pay for the increased cost of living has caused a general decline in

credit scores throughout the country. See infra Part I.C. A lower credit score means a lower

perception of an applicant’s employability by the employer. See infra Part I.C. 8 See infra Part I.E. 9 See infra Part I.E.1.

A

2014 Credi t Ch ecks & Dispara te Imp act 85

Part I of this Note discusses the background of disparate impact law generally; provides a history of employers’ use of credit checks; explains the development and expansion of disparate impact case law in Massachusetts; and outlines recently proposed legislation seeking to restrict the use of credit checks. Part II explains why using credit checks in employment decisions is problematic. Part III proposes two possible solutions to this problem—bringing a case alleging disparate impact and proposing a stronger bill sharply restricting the employer use of credit checks.

I. Background

A. Description of Employer Selection Practices

For years, employers have used pre-employment testing or other evaluative practices to vet potential employees.10 These pre-employment practices and procedures seek to screen and narrow the pool of applicants in an effort to hire the candidate that is most qualified and least likely to create problems in the workplace.11 The kinds of evaluative measures used by employers vary depending on the company and the type of job offered.12 Common forms of pre-employment evaluation include cognitive, personality, medical, physical ability, sample job tasks, criminal background, and credit checks.13

The use of screening methods are subject to federal and state regulations, namely through Title VII of the Civil Rights Act of 1964 and chapter 151B of the Massachusetts General Laws.14 These laws outline the lawful scope of such procedures, stating that employers may test potential employees as they see fit, so long as the tests are not intended, designed, or used to discriminate against or disproportionately exclude the applicant on the basis of race, religion, national origin, disability, age, or gender.15 In

10 See EEOC, EMPLOYMENT TESTS AND SELECTION PROCEDURES, (Sept. 23, 2010) available at

http://www.eeoc.gov/policy/docs/factemployment_procedures.html [hereinafter EEOC TESTS]. 11 See id. The practice of employment testing has increased over the years as a way to

preempt problems in the workplace, such as workplace violence or discrimination. Id. 12 See id. 13 Id. Personality tests are used to determine the extent to which a potential employee

possesses desired traits or dispositions, such as dependability or cooperativeness. EEOC

TESTS, supra note 10. Such tests are also used to predict the probability that an applicant would

engage in undesired conduct like theft or chronic absenteeism. Id. In this way, personality

tests can be used as a method of assessing the integrity of a potential employee. See id. 14 Id. 15 Id.; see 42 U.S.C. § 2000e-2(k) (2012); MASS. GEN. LAWS ch. 151B, § 4 (2012).

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addition, it is unlawful to use selection practices that are not job-related or inconsistent with business necessity.16

The use of credit as a “test” refers to an employer’s practice of obtaining and reviewing the financial and credit history of job applicants.17 Employers have used this information to screen applicants with increasing frequency,18 to the detriment of job-seekers with poor credit.19 Many applicants with bad credit or unfavorable financial histories have been denied employment opportunities by employers who asked for such information.20 The business community argues that credit histories are helpful to determine the responsibility level of potential employees.21

B. Legal Definition of “Disparate Impact” and Establishing a Claim

A claim for disparate impact alleges that a particular practice, while not facially discriminatory, is discriminatory nonetheless due to its disproportionately negative effect on a protected group.22 In Massachusetts, race, religion, gender, age, and disability are recognized as protected groups.23 A disparate impact claim can be brought where there is a “facially neutral employment practice,” that, when applied, has an adverse impact on employees that are part of a recognized protected group.24 Simply put, disparate impact focuses on employment practices or policies that are “fair in form, but discriminatory in operation.”25

16 42 U.S.C. § 2000e-2(k). 17 EEOC TESTS, supra note 10. 18 Beverley Earle et al., The Legality of Pre-Employment Credit Checks: A Proposed Model Statute

to Remedy an Inequity, 20 VA. J. SOC. POL’Y & L. 159, 167–68 (2012) (stating that 60% of

employers use credit checks as a hiring tool, which is a 35% increase from 2001); Sharon Goott

Nissim, Stopping a Vicious Cycle: The Problems with Credit Checks in Employment and Strategies to

Limit Their Use, 18 GEO. J. ON POVERTY L. & POL’Y 45, 47 (2010). 19 Jonathan Berr, Should Employers Be Barred from Using Credit Reports in Hiring?, CBS (Dec.

17, 2013, 5:12 PM), http://www.cbsnews.com/news/should-employers-be-prohibited-from-

using-credit-reports-in-hiring/; see also Earle et al., supra note 18, at 167. Contra Nissim, supra

note 18, at 46–48. 20 See Nissim, supra note 18, at 46; Berr, supra note 19. 21 See infra notes 203–205 and accompanying text. 22 Sch. Comm. of Braintree v. Mass. Comm’n Against Discrimination, 386 N.E.2d 1251, 1254

(Mass. 1979); M. AMY CARLIN ET AL., HOT TOPICS IN EMPLOYMENT DISCRIMINATION LAW 3

(MCLE 2009); GREGORY A. MANOUSOS ET AL., EMPLOYMENT DISCRIMINATION UPDATE &

CUTTING EDGE THEORIES 73 (MCLE 2011). 23 See 45 MASSACHUSETTS PRACTICE EMPLOYMENT LAW § 8.35 (2d ed. 2013) [hereinafter

MASS. EMPLOYMENT PRACTICE]. 24 Lopez v. Commonwealth, 978 N.E.2d 67, 79 (Mass. 2012); Lynn Teachers Union v. Mass.

Comm’n Against Discrimination, 549 N.E.2d 97, 103 (Mass. 1990). “Adverse employment

acts” can include: termination, demotion, failure to promote, transfer (in certain cases), and

other changes in terms of employment or employment conditions. MASS. EMPLOYMENT


Disparate impact claims arise from many different employment situations, such as appearance standards, education requirements, hiring or promotion criteria, or employment tests.26 When an employee brings a claim for disparate impact, the employee must first make a showing, supported by statistical evidence, that the practice or policy used by the employer has a disparate impact on a protected group of which the employee is a member.27 Once an employee has sufficiently demonstrated the discriminatory impact, the burden then shifts to the employer who must prove that the alleged discriminatory practice has a legitimate, non-discriminatory business purpose.28 This typically means that the employer must prove that there is a rational reason to use such a policy or practice in decision-making and that the policy or practice is a business necessity.29 To demonstrate this, an employer must show that it is related to job performance, meaning that it produces information about the employee that is related to the particular position offered.30 An employer must also show that there is not a less discriminatory alternative to the practice or policy, such as a test that is equally effective in predicting a desired quality that does not have a disparate impact.31

Unlike disparate treatment claims,32 disparate impact claims do not require a showing of intent to discriminate, but instead focus on the consequences of the employer’s policy or practice.33 The purpose of

PRACTICE, supra note 23, at § 8.35; see also 18 MASS. PRAC. MUNICIPAL LAW AND PRACTICE § 10.5

(5th ed. 2013) [hereinafter MASS. PRACTICE]. 25 Lynn Teachers Union, 549 N.E.2d at 103; MASS. EMPLOYMENT PRACTICE, supra note 23, at

§ 8.35. 26 See HOWARD E. BERKENBLIT ET AL., EMPLOYMENT LAW 288 (MCLE 2010) (explaining that

disparate impact analysis can be applied to many types of employment practices, despite the

fact that they may be inherently objective or subjective). 27 See EEOC TESTS, supra note 10. 28 See id. 29 See 42 U.S.C. § 2000e-2(k) (1964); CARLIN ET AL., supra note 22, at 3. 30 MASS. EMPLOYMENT PRACTICE, supra note 23, at § 8.35; see also 42 U.S.C. § 2000e-2(k);

MANOUSOS ET AL., supra note 22; EEOC TESTS, supra note 10 (explaining that the policy must

evaluate skills associated with being able to perform the job successfully). 31 See EEOC TESTS, supra note 10. 32 “Disparate treatment” claims allege that an employer purposefully made a particular

employment decision because of the employee’s race, religion, gender, age, or national origin.

MASS. PRACTICE, supra note 24, at § 10.5. The focus of these claims is to determine what the

employer’s mind-set was when they made the employment decision in question. See id.

Plaintiffs will seek to prove that their employer made the decision because of discriminatory

animus. See id. 33 Lopez v. Commonwealth, 978 N.E.2d 67, 79 (Mass. 2012) (explaining that disparate

impact does not require proof of discriminatory intent because “some employment practices,

adopted without a deliberately discriminatory motive, may in operation be functionally

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disparate impact claims is to remove employment barriers and eliminate employment practices that are discriminatory in their effect.34 With regard to the disparate impact caused by credit checks, the critical questions are whether credit history is related to job capability and whether credit checks create an obstacle to gainful employment for protected groups.35 To avoid liability, employers should administer practices without regard to any protected category, be aware of the particular job requirements, and ensure that the test or procedure is appropriate for the specific position.36

C. Effects of Employers’ Use of Credit Checks as a Basis for Hiring Decisions

1. Use of Credit Checks Strongly Correlates with Race and Creates a Self-Perpetuating Cycle

Recently, many people’s credit scores have taken a hit due to the economic recession, making the use of credit scores in the hiring process especially problematic.37 People with poor credit have difficulty finding work, perpetuating a cycle of unemployment and financial insecurity which, in turn, negatively impacts their credit.38 To make matters worse, this cycle also fuels the disparate impact experienced by those with low socioeconomic status.39

Since minorities as a demographic tend to have lower credit scores,40 the use of credit scores by employers disproportionately excludes racial minority applicants (namely African-Americans) from employment.41

equivalent to intentional discrimination”); CARLIN ET AL., supra note 22, at 3; MANOUSOS ET

AL., supra note 22, at 73. 34 BERKENBLIT ET AL., supra note 26, at 288. 35 Id. 36 EEOC TESTS, supra note 10. 37 See Nissim, supra note 18, at 47. 38 See Earle et al., supra note 18, at 168–69 (“This practice is based on flawed assumptions

that have detrimental effects on those who simply want to work so they can pay their bills and

escape the vicious cycle of debt and unemployment.”); Nissim, supra note 18, at 47 (“[T]he

people who most need a job (generally those already having credit problems) are not able to

get or keep a job, resulting in more credit problems and not way to remedy them.”). 39 See Adam T. Klein, Esq., Address at EEOC Meeting on Employment Testing and

Screening (May 16, 2007), available at http://eeoc.gov/eeoc/meetings/archive/5-16-07/klein.html

(“When employers dole out jobs based on financial status, they are letting financial inequality

dictate further employment inequality.”); Berr, supra note 19 (explaining that employers’ use

of credit reports unfairly keeps people out of the job market who have a bad financial history). 40 Nissim, supra note 18, at 47. On average, Caucasians have a 21% higher credit score than

African Americans. Klein, supra note 39 (explaining study results showing that African

Americans have a higher rate of bad credit than Caucasians). 41 Klein, supra note 39 (asserting that the use of credit checks as an employment test screens


“Employers today using credit checks are relying on a socioeconomic status—having a positive credit record—that, in today’s society, blacks and whites hold to differing extents due to broader racial inequalities in society.”42 Studies show that credit is correlated with race, meaning that minority groups, namely African Americans and Latinos, tend to have a pattern of proportionately worse credit than non-minority groups.43 These minority groups have an unemployment rate twice the national average and have far worse credit scores than non-minorities due to factors such as bankruptcy, lending discrimination, and the effect certain job industries have on a person’s credit.44 Therefore, using credit information to make employment decisions negatively impacts minorities at a disproportionately higher rate.45

2. Critics Argue that Credit History Is Not Related to Most Jobs or a Business Necessity

Some of the harshest criticism of this practice is that credit history is wholly unrelated to a person’s ability to perform certain job functions.46 In response, studies show there is no evidence that poor credit is correlated to an employee’s success at work, qualifications, or ability to adequately perform the essential functions of a job.47 Rather, “a person may have bad credit for reasons completely beyond that person’s control, such as disability, divorce, death in the family, illness, identity theft . . . all

out African Americans and certain other races); see also NAACP Opposes the Use of Credit

Reports by Employers When Making Hiring or Promotion Decisions, NAACP, http://www.naacp.

org/action-alerts/entry/naacp-opposes-the-use-of-credit-reports-by-employers-when-making-

hiring-or (last visited Feb. 21, 2015) (stating that the use of credit reports in making

employment decisions is very problematic for the African American community) [hereinafter

NAACP]. 42 Klein, supra note 39. 43 Id. 44 See Nissim, supra note 18, at 48 (showing that minorities are disproportionately impacted

by the use of credit checks). The Federal Reserve reported that African Americans have credit

scores that are half those of Caucasians. Id. The negative impact of using credit reports on

minorities is exacerbated by the fact that low paying service jobs tend to reduce credit rating,

African Americans are disproportionately affected by bankruptcy, and African Americans

tend to obtain loans on more unfavorable terms than non-minorities. See Klein, supra note 39. 45 See Klein, supra note 39. 46 See Earle et al., supra note 18, at 164 (stating that studies have shown credit information is

not a valid method to predict employee performance). 47 See id. at 165 (explaining that “many employees struggle with difficult financial

circumstances at home, but are still able still able to perform adequately at work”); Klein,

supra note 39 (“Bad credit is often the result of a variety of factors that bear no relation to

employment suitability.”); Nissim, supra note 18, at 49 (asserting that studies have not found

any correlation between quality of credit history and job performance).

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circumstances that [have] little to no bearing on how a person would perform [their] job.”48 Regardless, it is patently unfair for employers to evaluate the quality of a potential employee based on information unrelated to the job and considered to be private.49 Therefore, some argue that the use of credit reports is not a legitimate business necessity.50

D. Development of “Disparate Impact” Claims in Massachusetts

1. General Description of the Trend

The largest problem facing disparate impact claims alleging discrimination based on the use of credit history is that the current judicial climate is unfavorable for plaintiffs.51 For example, courts rigidly enforce deadlines for establishing a class of plaintiffs, and they tend to be deferential to employer autonomy.52

However, all is not lost for Massachusetts job applicants as Massachusetts discrimination law has expanded its classes of protected groups in recent years.53 Specifically, the law has grown to include gender, disability, and age as immutable characteristics protected under the laws regarding disparate impact.54 The general trend of disparate impact case law shows the courts’ attempts to strike a fair balance between the interests of potential employees and employers.55 To do so, the court must weigh the importance of an employee’s right to be free from discrimination against the employer’s right to make necessary business decisions.56 Notably, the U.S. Supreme Court in Griggs v. Duke Power Co. determined that an employer’s discriminatory intent in using a practice or policy is irrelevant.57 Rather, a practice that results in a disparate impact and is not shown to

48 Nissim, supra note 18, at 50. 49 See, e.g., Berr, supra note 19 (“‘This is about basic fairness . . . there is little to no evidence

of any correlation between job performance and credit score.’”). Senator Elizabeth Warren

believes using credit information is unfair because it excludes people from employment based

on their financial setbacks, which is also not correlated to their potential performance. Id. 50 See supra Part I.C.2. 51 See Earle et al., supra note 18, at 184–87. 52 See id.; see also, e.g., EEOC v. Freeman, 2011 WL 337339, at *3–7 (D. Md. Jan. 31, 2011);

EEOC v. Kaplan Higher Educ. Corp., 790 F. Supp. 2d 619, 619–20 (N.D. Ohio 2011). 53 See MANOUSOS ET AL., supra note 22, at 80. 54 Id.; see also, e.g., Sullivan v. Liberty Mutual Ins. Co., 825 N.E.2d 522, 529 n.10 (Mass. 2005);

Cox v. New England Tel. & Tel. Co., 607 N.E.2d 1035, 1041 (Mass. 1993); Sch. Commission of

Braintree v. Mass. Comm’n Against Discrimination, 386 N.E.2d 1251, 1251 (Mass. 1979). 55 Earle et al., supra note 18, at 175. 56 See id. at 175–76. Employment practices that create a disparate impact may also be

problematic because they effectively create barriers to employment. See id. 57 401 U.S. 424, 432–36 (1971).


have a significant purpose related to job performance is outweighed by the interest in protecting employees against discrimination.58 Since Griggs, courts throughout the country, including Massachusetts, continue to balance the employer’s business interests against the alleged resulting disparate impact and have held in favor of employers.59 In addition, there has been increased awareness of the problem created by employers’ use of credit checks, as demonstrated by the barrage of media coverage on the issue.60 As a result, the legal and political community have begun to brainstorm potential resolutions to combat this problem, such as proposed legislation seeking to outlaw the practice.61

2. Development of the Standard for “Disparate Impact”

One of the earliest cases discussing disparate impact in Massachusetts was School Committee of Braintree v. Massachusetts Commission Against Discrimination.62 The plaintiff in this case was a pregnant teacher whose doctor requested that she be allowed to take sick leave because her medical condition no longer allowed her to work, but the school denied this request.63 The Court held that an employer who denies a female employee the ability to use accrued sick time to extend her maternity leave to recover from a pregnancy-related disability was unlawful gender discrimination.64 The Court further held that the employment policy prohibiting teachers from using their sick leave to obtain extended leave, and not compensating teachers for the sick time used, created a disparate impact.65

58 Id. 59 See Earle et al., supra note 18, at 176–78; see also, e.g., Sch. Bd. of Nassau County v. Arline,

480 U.S. 273, 287 (1987) (stating that the goal of the burden-shifting framework for

discrimination claims is to protect individuals from discrimination, but also to give

“appropriate weight to [the] legitimate concerns of [employers].”); Cox, 607 N.E.2d at 1041

(recognizing interests of an employer by stating that an employee claiming disparate impact

as a result of a disability must be able to show that they are otherwise qualified and able to

perform the essential functions of their job). 60 See, e.g., Berr, supra note 19; Rachel Farrell, Why Do Employers Care about Your Credit?,

CNN (July 12, 2010), http://www.cnn.com/2010/LIVING/07/12/cb.employers.your.credit/;

Suzanne Lucas, Don’t Ban Pre-Employment Credit Checks, CBS MONEY WATCH (Apr. 12, 2011),

http://www.cbsnews.com/news/dont-ban-pre-employment-credit-checks/; Bill McMorris, An

Impactful Policy: ‘Disparate Impact’ Hurts Businesses, Workers According to Experts, WASH. FREE

BEACON (Apr. 26, 2013), http://freebeacon.com/politics/an-impactful-policy/. 61 See infra Part I.E. 62 386 N.E.2d 1251, 1251 (Mass. 1979). 63 Id. at 1253. 64 Id. at 1252. 65 See id. at 1256 n.12.

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The central focus in employment discrimination cases is whether an employee or prospective employee was penalized due to race, religion, sex, or national origin.66 School Committee of Braintree was brought on a disparate treatment ground, rather than disparate impact, despite the fact that disparate impact could have been established.67 The Court expressly recognized that the school’s policy was “sex-neutral[], which bar[red] use of sick leave during all extended leaves of absences.”68 The Court ruled against the employer’s business interest and in favor of the employee, finding that the stated policy discriminated against women based on their sex and that the employer’s argument that the rule applied equally did not hold water, as it effectively eliminated women’s ability to take maternity leave.69

In 1993, the Supreme Judicial Court decided Cox v. New England Telephone & Telegraph Co., a disability disparate impact case and a case of first impression in regard to employment disability discrimination.70 The plaintiff was a disabled employee who worked a clerical position at the defendant company.71 The company required that he pass a pole-climbing course—which he could not do at that time due to his disability, but had previously passed—and was subsequently terminated.72 The plaintiff brought a disparate impact claim, arguing that the policy requiring an employee to pass a pole-climbing course was discriminatory in effect because it discriminated against disabled employees that could not complete the course and was unrelated to his clerical position.73

One focus of the court’s analysis was whether the plaintiff was qualified and able to perform the essential functions of his job despite his disability.74 The Court made an important distinction between the rights of employees who are disabled and unable to perform their job and those that are qualified “in spite of their handicap.”75 The Court held that disabled employees qualified to perform the essential functions of their job can rightfully bring a disparate impact claim because there can be no legitimate business reason to terminate a disabled employee who can perform the

66 Id. at 1253–54. 67 Id. at 1256 n.12. 68 See Sch. Comm. of Braintree, 386 N.E.2d at 1255. 69 Id. at 1255. 70 607 N.E.2d 1035, 1039, 1041 (Mass. 1993). 71 Id. at 1036. 72 Id. at 1036–37. 73 Id. at 1036. 74 Id. at 1040. 75 Id.


job.76 However, the Court ultimately held that the plaintiff was not a victim of disparate impact because he failed to fulfill his burden of proof that the pole-climbing skill was not an essential function of his job.77

Lopez v. Commonwealth, decided in 2012, reflects the most current view of the Supreme Judicial Court on disparate impact claims.78 This case was brought by African American and Hispanic police officers, employed by municipalities throughout Massachusetts, who alleged that the use of multiple-choice exams to determine promotions had an unlawful disparate impact.79 After the departments graded the exams, the candidates were then ranked against each other.80 These exams were alleged to be discriminatorily administered and adversely impacted the African American and Hispanic candidates because they were ranked lower than non-minority test-takers, causing them to be denied promotions, despite the fact that they were equally qualified.81

At the outset, the Court recognized that this case was properly brought because the plaintiffs adequately alleged that the defendant’s practice interfered with the “plaintiff’s enjoyment of rights protected by [Massachusetts’ laws on discrimination], specifically the plaintiffs’ right to be free of racial discrimination in opportunities for promotion.”82 The Court’s opinion was supported by the intent of discrimination laws—to prevent employers from using their power over employment to close the door to individuals on unlawful or irrational grounds.83 The opinion focuses on the argument that all potential job applicants have the right to equal-opportunity employment, which means that their opportunity for promotion, hiring, or conditions of employment will not be influenced by their protected status.84 This can be shown by employers using factors or information that are not related to job performance.85 Here, the Court found that the defendant’s use of the multiple-choice tests and a ranking system interfered with the minority police officers’ right to be equally considered for employment and to have only their job-related qualifications considered.86

76 Cox, 607 N.E.2d at 1040. 77 Id. at 1041–42. 78 See 978 N.E.2d 67, 67 (Mass. 2012). 79 Id. 80 Id. at 72. 81 Id. 82 Id. at 71. 83 Id. at 75. 84 Lopez, 978 N.E.2d at 77. 85 See id. 86 Id.

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E. Proposed Massachusetts Legislation

In addition to disparate impact case law, there is legislative development expanding the protections of employees from invasive and discriminatory practices by the employers.87 The most notable example is a law prohibiting employers from making pre-employment inquiries into a job applicant’s potential disabilities.88 The law prohibits employers from asking applicants if they are disabled and inquiring as to the nature or severity of their known disability.89

As recently as 2013, the Massachusetts legislature has proposed three bills making the use of credit checks in employment decisions unlawful.90 These bills seek to amend either the Massachusetts anti-discrimination statute or fair business practice statute to include a clause restricting the use of credit checks as a method of evaluating potential employees.91 While these proposals demonstrate an awareness of the problems caused by this employer practice, they have yet to be enacted.92

1. Bill 3518: “An Act Relative to the Use of Credit Reports in the Hiring Process”93

Bill 3518 was referred to committee in January 2011 and seeks to amend chapter 151B to restrict an employer’s use of an applicant’s credit history.94 Specifically, it seeks to prevent employers from discriminating based on an applicant’s credit history and from using credit history as a basis for hiring or firing decisions.95 However, this bill is not an absolute ban on the use of credit checks—employers may still consider an applicant’s credit history if it relates to a “bonafide occupational

87 See, e.g., MASS. GEN. LAWS ANN. ch. 151B § 4(16) (2013); MASS. EMPLOYMENT PRACTICE,

supra note 23, at § 8.23. 88 See sources cited supra note 87. 89 See sources cited supra note 87. 90 See, e.g., H.R.1731-1234, 188th Gen. Ct., Reg. Sess. (Mass. 2013), available at

https://malegislature.gov/Document/Bill/188/House/H1731.pdf [hereinafter Mass. H.R. 1731];

H.R. 1744-1544, 188th Gen. Ct., Reg. Sess. (Mass. 2013), available at https://malegislature.gov/

Document/Bill/188/House/H1744.pdf [hereinafter Mass. H.R. 1744]; H.R. 3518-1595, 187th

Gen. Ct., Reg. Sess. (Mass. 2011), available at http://www.malegislature.gov/Bills/PDF?billId=

12920&generalCourtId=1 [hereinafter Mass. H.R. 3518]. 91 See infra Part I.E.1–3. 92 See sources cited supra note 90 (indicating that all three bills went to the Committee on

Labor and Workforce Development as of January 2013). 93 Mass. H.R. 3518, supra note 90. 94 Id. 95 See id.


qualification.”96 The bill itemizes particular circumstances that would allow for such consideration and requires that employers prove the existence of at least one of the following: (1) a state or federal law, or a Department of Labor regulation requiring such consideration; (2) that the duties of the position include custody or unsupervised access to a minimum of $2,500 or signatory power for a minimum of $100 per transaction; (3) that the position sets or controls direction of business; or (4) that the position involves access to personal or confidential information that is financial in nature.97 This bill does not address the issue of employee consent to an employer’s request for such information or mention how this practice is connected to discrimination.98

2. Bill 1731: “An Act Relative to the Use of Credit Reports in the Hiring Process”99

Bill 1731 was referred to committee in January 2013 and also seeks to amend chapter 151B to limit an employer’s ability to use credit checks.100 The stated focus of this bill is to “prohibit employers from discriminating against certain employees or potential employees based on [their] credit history or report.”101 To achieve this, the bill regulates the acceptable scope of the use of credit reports in a similar fashion to Bill 3518.102 Specifically, this bill uses the same language as Bill 3518, but limits the “bonafide” uses of credit to circumstances in which: “(i) the duties of the position include custody of or unsupervised access to cash or marketable assets valued at $2,500 or more; [or] (ii) the duties of the position include signatory power over business assets of $1,000 or more per transaction.”103 By limiting the acceptable uses of credit history, this bill subjects employers to greater restrictions.104 Aside from limiting the permissible use of credit information, the bill also differs from Bill 3518 by increasing the amount of money over which an employee must have signatory power from $100 to $1,000.105

96 See Mass. H.R. 3518, supra note 90. 97 See id. 98 See id. 99 Mass. H.R. 1731, supra note 90. 100 Id. 101 Id. 102 Compare id., with Mass. H.R. 3518, supra note 90. 103 Mass. H.R. 1731, supra note 90. 104 See id. 105 Compare id., with Mass. H.R. 3518, supra note 90.

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3. Bill 1744: “An Act Regulating the Use of Credit Reports by Employers”106

Bill 1744 differs from the above two by seeking to amend both the Massachusetts law on unfair business practices, chapter 93A of the Massachusetts General Laws, as well as chapter 151B.107 The first provision focuses on amending chapter 93A to state that no person, employer, or employment recruiters shall:

(1) use a consumer report in connection with or as a criterion for an employment purpose, including decisions related to hiring, termination, promotion, demotion, discipline, compensation, or the terms, conditions or privileges of employment;

(2) request or procure a consumer report for the purposes described in clause (1);

(3) ask an employee or applicant about his or her consumer report or about any information contained therein regarding credit worthiness, credit standing or credit capacity.108

This bill does provide certain circumstances where an employer is permitted to review an employee’s or potential employee’s credit report, but limits it to situations where it is required by federal or state law.109 The bill also provides a general clause stating that even where employers can use credit information, they may not do so in any manner that would create “adverse employment discrimination” as against federal or state law.110

In addition, the bill requires that an employer seeking to review an employee’s or potential employee’s credit information must obtain written consent from the employee after providing, in writing, the employer’s: (1) reasons for reviewing the report; (2) intention to take an adverse employment action due to the report; and (3) reasons for the adverse action.111 The bill then provides an employee facing adverse action the opportunity to dispute the relevance of the credit information to the

106 Mass. H.R. 1744, supra note 90. 107 See id. 108 Id. 109 Id. 110 Id. “[A]n employer shall not use a consumer report in a manner that results in adverse

employment discrimination prohibited by federal or state law, including chapter 151B of the

General Laws and Title VII of the Civil Rights Act of 1964.” Id. 111 Id. The employer must provide all of the above in writing at least fourteen days prior to

taking any action. Mass. H.R. 1744, supra note 90.


employer’s decision and explains the procedure to be followed should such a dispute arise.112

Finally, the bill outlines the remedies that employees are entitled to after a violation has occurred.113 These remedies allow claims to be brought for discrimination under chapter 151B; unfair business practice under chapter 93A; or employees’ claims of retaliation or adverse actions.114 Also, employees or applicants cannot be required or asked to waive their rights under this bill.115

II. Why Employer Use of Credit Checks Is an Important Problem

A. There Is Currently No Concrete, Effective Solution to Protect Against the Use of Credit Checks

Notwithstanding evidence of the disparate impact caused by employer use of credit checks at the hiring stage, no legal cause of action has been filed and no legislation has passed addressing the issue.116 Inaction is problematic because those affected will continue to have difficulty securing employment.117

1. The Massachusetts Courts Failed to Resolve the Issue

Massachusetts case law on discrimination, as it currently exists, does not resolve the issue at hand because it fails to address two key problems.118 First, the adverse impact on protected groups has yet to be formally recognized by the court as a discriminatory practice because no case alleging such discrimination has been brought before a Massachusetts court.119 Second, discrimination claims have focused on the impact of certain practices on “protected classes,” which Massachusetts recognizes

112 Id. “If the employee or applicant provides oral or written notice to the employer during

the 14 day period . . . that he or she dispute[s] the accuracy of the consumer report with a

consumer reporting agency, the employer shall not take an adverse employment action until

the resolution of the dispute . . . .” Id. 113 Id. 114 Id. The discrimination claims can be brought either before the Massachusetts courts or

the Massachusetts Commission Against Discrimination. Id. 115 Mass. H.R. 1744, supra note 90. 116 See supra Part I.D–E. 117 See NAACP, supra note 41 (“Using of a potential employee’s credit history as part of the

hiring process is just one more tool in the arsenal of discrimination which is keeping too many

racial and ethnic minorities from gainful employment.”). 118 See infra notes 119–22 and accompanying text. 119 See supra Part I.D; cf. Earle et al., supra note 18, at 184 (explaining that the judicial climate

has not been ready for credit check disparate impact claims in other state court systems).

KARPA_NOTE_18_FINAL


only as race, religion, gender, age, and disability.120 Socioeconomic status is not yet recognized as a protected class.121 In order to protect job applicants, this employment practice must be greatly restricted by either the Massachusetts judiciary, the legislature, or both.122

Current chapter 93, §§ 50–68 of the Massachusetts General Laws and the federal Fair Credit Reporting Act allow the use of credit checks as part of the pre-employment screening process, but impose certain consent-based regulations.123 The statutes require employers to disclose their intent to obtain a potential employee’s financial information and obtain the potential employee’s prior consent.124 However, these statutes do not solve the problem because they still allow the practice, and the regulations in place have not reduced the discriminatory impact of credit checks.125 Specifically, the disclosure and consent requirements do little to reduce the impact to the potential employee because financially struggling applicants with bad credit are unlikely to refuse a potential employer’s request to review their credit history.126 These requirements do not provide employees with a meaningful choice about whether to refuse or allow a credit check.127 It is problematic that case law has yet to provide a solution, but the expansion of disparate impact law will be helpful in creating a more workable bill banning the use of credit checks.128

2. The Proposed Massachusetts Legislation Does Not Adequately Solve the Problem

While the proposed bills are a step in the right direction in reducing the negative impact of credit checks in employment decisions, they either do not provide adequate protection or fail to recognize the breadth of the problem.129 However, evaluating the quality of these bills provides helpful

120 MASS. EMPLOYMENT PRACTICE, supra note 23, at § 8.15. 121 See supra notes 14–16. 122 See supra notes 119–21 and accompanying text; see also infra Exhibits A and B. 123 15 U.S.C. §§ 1681–1681t (2012); Mass. Gen. Laws ch. 93 §§ 50–68 (2006); MASS.

EMPLOYMENT PRACTICE, supra note 23, at § 13.18. 124 See sources cited supra note 123. 125 See supra Part I.E. 126 See Nissim, supra note 18, at 47–48 (explaining that the consent requirement is not an

effective protection because applicants feel that if they do not give consent, they will not get

the job). 127 See id. 128 See infra notes 172, 267–70 and accompanying text; see, e.g., infra Exhibit B (proposing

more prosaic bill). 129 See infra Part II.A.2.


insight into how to craft a more prosaic bill that provides adequate protection and sufficiently addresses the issue at hand.130

i. Evaluation of Bill 3518

Bill 3518 is effective in that it seeks to prevent an employer’s use of credit history as the basis of any decision regarding someone’s employment—be it at the hiring or firing stage—and is ineffective in that it provides too many potential exceptions.131 Providing a long list of acceptable uses of credit checks provides less protection to employees and potential employees because employers have more opportunities to argue that the practice is legitimate.132 In addition, it is difficult to comprehend how certain job characteristics or position requirements in the list justify consideration of an applicant’s credit history.133 For example, the bill states that any position that is managerial and “involves setting the direction or control of the business” justifies review of an applicant’s credit history.134

There are several problems with this proposed provision.135 The first is its ambiguity.136 A blanket reference to a position that is “managerial” provides no specific guidance as to what positions are within this scope, and it can be argued that managerial roles could include a significant number of employees.137 To continue using credit checks, employers could simply argue that a wide range of employees are managerial, including many who presumably are not.138

Second, it is difficult to understand how a managerial role justifies inspection of an applicant’s credit history, or why such information is relevant.139 The very existence of acceptable circumstances in which the bill allows credit checks ignores the fact that credit history has no bearing on an applicant’s ability to perform his job duties, whether those duties are managerial, custodial, or otherwise.140

130 Compare Part II.A.2, with infra Exhibit B. 131 See infra text accompanying notes 132–38. 132 See YULE KIM, CONG. RESEARCH SERV., 97-589, STATUTORY INTERPRETATION: GENERAL

PRINCIPLES AND RECENT TRENDS 5–10, 16–17 (2008), available at http://www.fas.org/sgp/crs/

misc/97-589.pdf. 133 See Klein, supra note 39. 134 See Mass. H.R. 3518, supra note 90. 135 See infra notes 137–44 and accompanying text. 136 See KIM, supra note 132, at 5–10. 137 See Mass. H.R. 3518, supra note 90; KIM, supra note 132, at 5–10. 138 See KIM, supra note 132, at 5–10, 16–17. 139 See supra notes 49–57 and accompanying text; see also infra Part III.A.1.ii. 140 See Klein, supra note 39.

KARPA_NOTE_18_FINAL


In addition, Bill 3518 does not reference or outlaw the use of discriminatory credit checks.141 Therefore, employers are permitted to continue using credit checks under the listed circumstances, to the detriment of minority job applicants.142 As a result, minorities or people of low socioeconomic status are forced into jobs that do not trigger the list.143 A more effective bill would include a provision in the list section stating that “credit checks within these uses cannot be applied to discriminate or create a disparate impact.”144

ii. Evaluation of Bill 1731

Bill 1731 is more effective because it clearly identifies the use of credit checks as the core issue by prohibiting employers from using credit checks in a discriminatory manner with regard to the evaluation of potential employees.145 This bill provides more protection than Bill 3518 because its list of acceptable uses of credit checks is shorter.146 However, it is only slightly more desirable because it contains all of the problems previously identified in Bill 3518.147

iii. Evaluation of Bill 1744

Bill 1744 is the most effective of the three, demonstrating greater attention to the details of the problem and outlining the remedies available to employees or applicants hurt by this practice.148 It thoroughly addresses the problems created by the use of credit checks and attacks the practice

141 See id. 142 See Kenneth M. Willner, Statement at EEOC Meeting on Employment Testing and

Screening (May 16, 2007), available at http://eeoc.gov/eeoc/meetings/archive/5-16-

07/willner.html (explaining that enforcement programs play an important role in enforcing

compliance with anti-discrimination laws); cf. KIM, supra note 132, at 16–17. 143 See NAACP, supra note 41. Arguably such lists could in effect force minorities, or people

of low socioeconomic status, into positions with lower salaries that carry less responsibility,

perpetuating the cycle of barriers to employment. See generally Andrew Martin, As a Hiring

Filter, Credit Checks Draw Questions, N.Y. TIMES, Apr. 9, 2010, available at http://www.nytimes.

com/2010/04/10/business/10credit.html?pagewanted=all (stating that credit checks are used for

mostly leadership positions). Description of the leadership positions or other categories of

positions credit checks are used for implies that a job applicant could avoid credit checks if

they applied to different types of jobs. See Farrell, supra note 60. 144 See KIM, supra note 132, at 16–17. 145 Cf. Mass. H.R. 3518, supra note 90. 146 See id. 147 Compare Mass. H.R. 1731, supra note 90, with Mass. H.R. 3518, supra note 90. 148 Compare Mass. H.R. 1744, supra note 90, with Mass. H.R. 3518, supra note 90, and Mass.

H.R. 1731, supra note 90.


from both business and employment discrimination standpoints.149 It is also effective because it clearly states—in terms that employers cannot misconstrue or argue against—that credit checks cannot be used to discriminate.150 It also creates remedies, giving employees additional safeguards.151

However, the bill mishandles the employee-consent requirement.152 While it was correct to address the fact that many job applicants are somewhat “coerced” into consenting to employer review of their credit information, the procedure it puts forth is unnecessarily complicated.153 By requiring an employer to disclose its reasons for obtaining the credit report and creating an appeal-like procedure for employees to dispute its use, the bill attempts to deter employers from using credit checks in a discriminatory fashion.154 However, applicants are unlikely to feel less pressure to consent to the credit check by the mere disclosure of the employer’s reason for requesting it.155 The issue is not so much the reason for an employer’s review of their credit history, but rather that employers should not be able to seek the employee’s consent in the first place.156

In addition, requiring employers to disclose whether an adverse employment decision was based on the credit report is unlikely to provide an employee much protection, even with the potential for employee appeal.157 Despite the fact that the statute requires disclosure of the credit-based reason for the adverse action, employers can simply provide other reasons for their decision.158 Further, if an applicant disputes a credit-based decision by the employer, there is no guarantee that the applicant will get the job even if the appeal is successful, and if the applicant is hired, he will have begun his employment relationship on hostile grounds.159

149 See id. 150 See id. 151 See id. 152 See infra notes 153–56 and accompanying text. 153 See Nissim, supra note 18, at 47–48. 154 See Mass. H.R. 1744, supra note 90. 155 See Nissim, supra note 18, at 47–48. Job applicants likely feel pressure to consent to a

credit review to please the potential employer, even though it may not be in their best interest.

Id. In addition, outside factors—such as prolonged unemployment, mounting debt, or familial

responsibilities—may increase the likelihood that an applicant will consent. Id. 156 See id. 157 See infra notes 167–70 and accompanying text. 158 See Lucas, supra note 60. 159 See Mass. H.R. 1744, supra note 90; Ian Ayres & Peter Siegleman, The Q-Word As Red

Herring: Why Disparate Impact Liability Does Not Induce Hiring Quotas, 74 TEX. L. REV. 1487,

1491–93 (1996).

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In sum, none of these bills adequately resolve the problems created by using credit checks because each bill allows their use without legal protection.160

B. Discrimination at the Hiring Stage is Cause for Greater Concern

Discrimination at the hiring stage is especially problematic because it is so difficult to prove, sharply reducing the number of cases in which such discrimination is even alleged.161 The proportion of disparate impact cases focusing on the firing stage filed each year consistently outnumbers those centering on the hiring stage.162 As a result, employers focus their attention and resources on reducing the threat of liability for discrimination at the firing stage, while potentially discriminatory practices at the hiring stage go unnoticed to the detriment of job applicants.163

This issue is exacerbated by the lack of direct evidence of the discrimination.164 Employees who face discrimination as a result of their race, gender, age, or membership in another protected category rarely have “‘direct’ evidence of discrimination, because employers are unlikely to tell an employee that it is making an adverse decision [on the basis of their] legally-protected characteristic.”165 “Instead the vast majority of discrimination cases involve ‘indirect’ or circumstantial evidence of disparate treatment.”166

160 See supra Part II.A.2. 161 Ayres & Siegleman, supra note 159, at 1493. The author puts forth an argument as to

why it is more difficult for an employer to avoid unlawful disparate impact upon discharge,

stating that:

The racial composition of hired workers forms a clear baseline against

which disparities in firing rates can easily be compared . . . By contrast,

an employer whose flow of newly hired workers is ten percent black in

an area where the population is fifteen percent black can [argue] that

the ‘relevant[,]’ [qualified, and interested] population has a different

racial composition.

Id. 162 Id. at 1494 (explaining the proportion of the two types of cases and stating that “[t]he

bottom line is that disparate impact firing cases have outnumbered hiring cases in every year

since 1986”). 163 See id. 164 See id. 165 MANOUSOS ET AL., supra note 22, at 73. 166 Id.


ANALYSIS

III. Proposed Resolutions

Something must be done to end the disparate impact created by employer use of credit checks and to protect job applicants from this practice.167 Since employers, and the business community in general, continue to advocate for autonomy in their employment policies and decision-making procedures,168 it is unlikely that applicants can count on them to independently facilitate change.169 Therefore, current and potential employees must turn to the law.170

There are two realistic legal options to ameliorate the negative impact of using credit checks on potential employees: bringing a case, with the hope that the court will declare the practice unlawful, or proposing a statute that would render this practice illegal.171 Both options have strengths and weaknesses in terms of their likelihood of success and resulting protective scope.172 Fortunately, these potential resolutions are not mutually exclusive and can be combined to achieve the goal of reducing the discriminatory impact of an employer’s use of credit checks.173

A. A Disparate Impact Claim Alleging Credit Checks as the Cause Is a Viable Potential Resolution and Could Provide Protection to Job Applicants in Protected Groups

Given the fact that case law in Massachusetts has expanded to accept new causes of disparate impact as legitimate claims,174 there is a sufficient foundation to bring a case alleging that the use of an applicant’s credit

167 See Blake Ellis, Employer Credit Checks Keep Jobless Out of Workforce, CNN MONEY (Mar. 4,

2013), http://money.cnn.com/2013/03/04/pf/employer-credit-checks/index.html (stating that

studies of middle to low-income families have shown that, “[o]ne in four Americans have

been required to go through a credit check when applying for a job, and one in ten have been

denied jobs due to information in their credit report,” even for entry-level positions). 168 See, e.g., id. 169 See Farrell, supra note 60; Ellis, supra note 167. 170 See supra notes 168–69 and accompanying text. 171 See supra Part II (discussing that this practice is problematic and the two legal avenues

used to remedy discrimination to date, namely legislation and court cases). 172 See infra Parts III.A.2–3, B.1–2. 173 See infra Parts III.A–B (discussing that the cause of action would be based on disparate

impact and the proposed law would directly focus on outlawing the employment practice to

prevent discrimination actions which do not conflict or preempt the other). 174 See, e.g., Cox v. New England Tel. & Tel. Co., 607 N.E.2d 1035, 1039–41 (Mass. 1993); Sch.

Comm. of Braintree v. Mass. Comm’n Against Discrimination, 386 N.E.2d 1251, 1255–56

(Mass. 1979).

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history in the hiring process creates a disparate impact.175 The following provides a framework of potential arguments supporting such a complaint,176 mainly drawing from recent developments in Massachusetts disparate impact case law.177

1. Arguments Supporting the Theory

i. Disparate Impact Law in Massachusetts Supports this Claim

The judicial climate for disparate impact in Massachusetts is conducive to such a claim because this area of law has expanded its recognition of the causes of disparate impact.178 As Massachusetts expanded the scope of its protections against discrimination by recognizing additional sources of disparate impact179 and establishing additional protected classes,180 it provided a foundation for the argument that credit checks are an analogous source of discrimination and the affected employees are worthy of protection.181 Massachusetts courts have begun to recognize the importance of reducing barriers to the workplace, a development that directly supports the argument that employer use of credit checks to evaluate applicants must be strictly regulated.182 The instant test case argues that applicants should only be assessed on their substantive qualifications by use of non-discriminatory evaluative methods.183 The

175 See, e.g. Cox, 607 N.E.2d at 1039–41; Sch. Comm. of Braintree, 386 N.E.2d at 1255–56. 176 See infra Exhibit A (providing a detailed outline of a complaint alleging disparate impact

based on employer use of credit checks). 177 See infra Part III.A.1.i. 178 See supra Part I.D.1 (describing the development of disparate impact law in the courts). 179 See, e.g., Sch. Comm. of Braintree, 386 N.E.2d at 1253–56 (finding that restrictive sick leave

policies could be discriminatory as applied to women seeking to take maternity leave); Porio

v. Dep’t of Revenue, 951 N.E.2d 714, 716–19, 723 (Mass. App. Ct. 2011) (finding that

reductions in force for budgetary reasons can be a source of disparate impact). 180 See, e.g., Cox v. New England Tel. & Tel. Co., 607 N.E.2d 1035, 1039 (Mass. 1993)

(holding disabled is a protected class). 181 See infra Exhibit A. 182 See Sch. Comm. of Braintree, 386 N.E.2d at 1253–56; Porio, 951 N.E.2d at 723 (explaining

the historical trend of applying a “broad-brush” approach to discrimination claims, meaning

that the court mainly focuses on whether a discrimination has occurred, and does not strictly

distinguish discriminations that occur “‘because of’ a prospective status and claims that are

based on ‘discriminat[ion]’ related to that status”). 183 See infra Exhibit A. Lopez provides a favorable theoretical basis for bringing a case for the

use of credit checks, as it supports the argument that such interference with job applicants’

rights to be free of any discrimination, including against their financial standing, when an

employer makes a decision regarding their employability. See Lopez v. Commonwealth, 978

N.E.2d 67, 71–75 (Mass. 2012).


understanding that there are many sources of employment barriers is significant to the proposed case in this Note, see infra Exhibit A, because it supports the argument that applicants are entitled to protection from discriminatory bars to employment, such as credit checks.184

The disparate impact arguments in this proposed case follow the theoretical outline of the arguments in Cox: that the employment practice (the credit check and pole-climbing test) was facially neutral, but had a discriminatory impact on the employee based on his or her protected status (minority status and disability).185 Both employees argue that they are qualified and able to perform the essential functions of the job, yet were rejected and the evaluative mechanism used by the employer is functionally unrelated to the job.186

The use of credit checks is factually distinct from Cox in one important respect—unlike Cox, where the test was related to the essential function of the job,187 credit history does not reflect a person’s mental acuity or ability to perform job duties and responsibilities effectively.188 Cox remains persuasive and provides strong support for the arguments in the case proposed here; it also provides a basis to argue that a candidate qualified to perform essential job functions, and who is a member of a protected group, has a viable claim for disparate impact.189

Further, finding employer’s use of credit checks as a source of disparate impact is consistent with the policy of disparate impact law.190 In deciding cases that allege disparate impact, the court seeks to ensure that an individual’s rights were not unlawfully infringed upon as a result of actions that discriminate against a protected class.191 When applied to allegations of discrimination in the workplace, the court seeks to ensure that an employee—past, present, or future—has not been disparately

184 See infra note 189 and accompanying text. 185 See Cox, 607 N.E.2d at 1040–42. 186 See id. The plaintiffs bear the burden of proof that they were qualified as to the specific

requirements of the job. See id. at 1042. 187 See id. at 1038–39 (explaining that the ability to climb telephone poles is essential to

being a field service cable-man). 188 See MASS. GEN. LAWS ch. 151B § 4(16) (2012); MASS. EMPLOYMENT PRACTICE, supra note

23, at § 8.23. 189 See Cox, 607 N.E.2d at 1040–42 (noting that whether an applicant is qualified is an

independent inquiry that requires findings of fact); infra notes 192–95. 190 See infra notes 195–98 and accompanying text. 191 See, e.g., Lopez v. Commonwealth, 978 N.E.2d 67, 71, 78 (Mass. 2012) (finding that

African American employees had the right to be free from discrimination in the workplace);

Porio v. Dep’t of Revenue, 951 N.E.2d 714, 723 (Mass. App. Ct. 2011) (explaining that the

“disparate impact” cause of action seeks to provide a legal remedy for employment

discrimination against a protected class and should be applied broadly to fulfill this purpose).

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impacted by an employment policy.192 The fact that affected individuals are only potential employees should not preclude them from availing themselves of the protections of the law.193 The Porio Court’s use of chapter 151B, § 4 (outlawing discriminatory employment practices) to support its finding of discrimination is of particular relevance because the statute makes it unlawful for employers to “refuse to hire or employ or to bar or to discharge from employment” an individual that is a member of a protected group “unless [that decision] is based upon a bona fide occupational qualification.”194 The policy of using credit checks to assess future employees fits squarely within the intended goals of disparate impact law.195

In addition, this statutory provision (as well as the Court’s use of it in Porio, expanding the protected classes to include age) demonstrates the malleability of both the Court’s and the legislature’s understanding of what classes of people are subject to discrimination and infers the possibility of the court recognizing additional discrimination sources.196 The contention that credit checks are a legitimate source of discrimination at the hiring stage (because they disproportionately exclude minority applicants) receives foundational support from Porio’s use of chapter 151B, § 4, because a credit rating can be argued to fall outside the scope of a “bonafide occupational qualification.”197

Lastly, plaintiffs can strengthen their argument by making the court aware of other states that have heard cases on this very issue.198 Maryland, Ohio, and Florida courts have heard cases alleging that employer use of credit history as a hiring mechanism disparately impacted African-American and Hispanic applicants.199 While the Maryland and Ohio cases

192 See Sch. Comm. of Braintree v. Mass Comm’n Against Discrimination, 386 N.E.2d 1251,

1253–56 (Mass. 1979) (showing support for a cause of action for people who are not yet

employees and demonstrating that courts have favored the policy of protecting access to

employment over the autonomy of employers, even where the policy may be logically related

to the needs of the business); supra notes 78–86 and accompanying text (discussing Lopez,

where the court sought to ensure employees’ rights to be free from discrimination at any stage

of employment). 193 See Sch. Comm. of Braintree, 386 N.E.2d at 1253–56; Porio, 951 N.E.2d at 723. 194 Porio, 951 N.E.2d at 719 (quoting MASS. GEN. LAWS ch. 151B, § 4(1) (2012)) (emphasis

added). 195 See id. at 719–20 (“‘Age’ was not included as a protected status when 151B was first

enacted. However, the Legislature added ‘age’ [many] years later.”). 196 See id. at 716–20. 197 See id. 198 See Earle et al., supra note 18, at 184–86 (citing and explaining the Maryland, Ohio, and

Florida cases on this issue). 199 See id.


were dismissed for failure to meet the time requirements for assembling a class, they indicate a need for courts to hear and decide this issue.200

ii. Use of Credit History Is Not Job-Related or a Business Necessity

To defend against the allegations of the complaint, the defendants can argue that their policy of using credit checks as a hiring mechanism relates to the employment positions it is used for and is consistent with business necessity.201 In order to succeed, plaintiff’s counsel must demonstrate that the credit check is not job-related, a business necessity, or, if neither can be adequately established, that the practice is merely a pretext.202

The primary argument is that the credit check is a business necessity because it provides valuable information regarding potential employees and is an effective means of comparison between substantially similar applicants.203 Employers argue that credit checks help them evaluate job applicants and determine whether a potential employee has the required qualities to be successful.204 In addition, employers contend that pursuant to their duty to protect and ensure the effective operation of their businesses, they must take measures, including using credit checks, to ensure that they employ quality workers.205

Employers also contend that the impact of using credit checks is not as extensive as critics claim and that it does not impact a significant number of job applicants.206 Rather, employers argue that they only consider credit history for certain positions and disregard certain types of debt, like medical debt, reducing the negative impact on prospective employees.207 Supporters of the use of credit checks contend that employers only

200 See id. 201 EEOC v. Steamship Clerks Union, Local 1066, 48 F.3d 594, 602 (1st Cir. 1995). 202 See id. 203 See Farrell, supra note 60 (explaining that companies use credit histories to predict the

future success of two otherwise equally qualified candidates, finding the candidate with the

better credit to be more attractive). 204 See id. (stating that “supporters of credit checks don’t think it’s any different than

checking a candidate’s references”). 205 See id. (quoting Wendy Powell, an author who writes on hiring practices: “Employers

have a responsibility to assure that the proper due diligence is applied. Be prepared for the

possibility of a credit review, not only in the application process, but also throughout the

employment relationship.”). 206 See Lucas, supra note 60. 207 See id. (explaining that a 2010 survey showed that 47% of employers use credit checks

only for certain positions).

KARPA_NOTE_18_FINAL


consider credit after using other evaluative methods, credit typically being considered as only one of many reasons not to hire someone.208

First, the argument that the use of credit checks has a lesser negative impact than alleged, simply because it is used to evaluate applicants for only certain positions or only considers certain types of debt, ignores and misstates the core problem of this practice.209 The importance of the discriminatory impact on applicants with poor credit, whether they are minorities or people of low socioeconomic status, is not lessened simply because employers use the information only in certain circumstances.210 Circumstances in which employers do use credit checks, even if rare, have a disproportionately negative impact on applicants with bad credit.211

Secondly, employers are only able to view information on the types of debt incurred by the applicant, which makes evaluation of the applicant’s credit entirely subjective, increasing the risk of disparate impact.212 Therefore, employers are able to pick which sources of debt to focus on (i.e., home foreclosure or medical expenses), meaning that employers are focusing on debt derived from unemployment, predatory loans, or other such sources.213 These types of debt tend to disproportionately affect minority groups, increasing the risk of discrimination of these groups.214

Lastly, a credit score is often not conclusive proof of an applicant’s integrity, loyalty, or commitment to professional responsibility.215 Even if it were conceded that credit history does provide such information, there are

208 See id. (explaining a survey that showed that employers ranked credit checks lowest in

the types of evaluative methods used). 209 See Ellis, supra note 167 (stating that some employers use credit checks for entry-level

and low-paying positions as well as more senior level positions). 210 See Statement of Roe T. Vann, EEOC Meeting on Employment Testing and Screening

(May 16, 2007), available at http://eeoc.gov/eeoc/meetings/archive/5-16-07/vann.html (arguing

that the problem with many employment tests is that employers use tests that are not valid or

suitable for the actual job and recommends that employers conduct audits to ensure that the

tests are actually valid, are not outdated, and most importantly, that they do not cause

disparate impact); supra Part I.C. 211 See Willner, supra note 142 (“[U]nlawful practices affect large numbers of applicants and

employees.”). 212 See Ellis, supra note 167 (explaining that employers who use credit checks view only the

information within the credit report, such as debts and payment histories, making their

evaluation of an applicant’s credit subjective). 213 See Lucas, supra note 60; Ellis, supra note 167. 214 See Ellis, supra note 167 (stating that, “[o]n average, African-American and Latino

households have worse credit scores than white households,” which is partially attributed to

higher unemployment rates in those communities. In 2012, studies showed that 14% of

African Americans, 10% of Hispanics, and 6% of white Americans were unemployed). 215 See supra Part I.C.2.


many less discriminatory alternatives available to employers.216 Employers can use other forms of employment testing, such as personality tests or sample position hypotheticals, to determine the same type of information credit checks are alleged to provide.217 These alternatives reduce the risk of disparate impact on protected groups or on those with low socioeconomic status and are more tailored to identifying the presence of certain characteristics.218

The problem with credit checks is not that they are used for certain jobs or considered as a last resort—it is that they are used at all.219 Any use of credit history as an evaluative method risks disparate impact on minority groups or those of a low socioeconomic status.220 Employers do not have an absolute right to use any criteria as a means of making an employment decision; and they cannot subject their employees to practices that have a disproportionately negative impact on certain groups.221

2. Advantages of Bringing a Disparate Impact Cause of Action

i. Protection to Applicants and Further Expansion of Disparate Impact Law

Should the court determine that the employer’s use of credit history caused a disparate impact, that case would likely provide lasting protection against employer use of credit checks in a way that creates disparate impact.222 Once a court finds a particular practice to be discriminatory, a subsequent holding in which disparate impact (resulting from the use of credit history) is not found, would serve to distinguish the facts of this subsequent case from the initial one; however, it would not necessarily overrule the court’s core recognition of the fact that credit checks can cause a disparate impact.223

216 See EEOC TESTS, supra note 10; supra Part I.C.2. 217 See supra Part I.A. 218 See Klein, supra note 39 (arguing that credit checks have not been validated as a test for

any job or demonstrated a meaningful relationship to successful performance). Contra Farrell,

supra note 60 (explaining business reasons for using credit checks: “[e]nsuring that your

employees are responsible and ethical is a must”). 219 See Farrell, supra note 60; Ellis, supra note 167. 220 See Ellis, supra note 167; Klein, supra note 39; Nissim, supra note 18, at 48. 221 See BERKENBLIT ET AL., supra note 26, at 288. 222 See id. 223 See, e.g., Cox v. New England Tel. & Tel. Co., 607 N.E.2d 1035, 1040–43 (Mass. 1993)

(explaining that while the court did not find that there was discrimination against the

employee in this case, it does not overrule the bare fact that certain employment requirements

can have a disparate impact on disabled employees).

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An affirmative holding for disparate impact would also be generally advantageous to disparate impact law in Massachusetts because it would further expand the court’s recognition of credit information as a source of discrimination at the hiring stage.224 This would continue the expansion of disparate impact law by clearing the path for recognition of new sources of discrimination.225

ii. Improved Awareness of the Issue

One major advantage of bringing a case is that even in the event that the case fails, it will have drawn attention to the issue.226 Since the media is already a part of the credit check conversation,227 the case will, at the very least, generate more media attention and may encourage those negatively affected by the use of credit checks in hiring decisions to come forward and retain counsel.228 The coverage may grab the attention of employers and encourage them to take proactive steps to change their policies with regard to the use of credit checks, reducing their discriminatory impact and avoiding potential future litigation.229 In addition, bringing a case would expose the weaknesses this claim may have, so that a stronger claim can be filed in the future.230

3. Potential Disadvantages of Bringing a Disparate Impact Claim

i. Limitations of Protective Reach and Recovery

The potential disadvantages of a disparate impact claim emanate from the elements of the cause of action and the required evidence.231 In order to

224 See supra Part III.A.1.i.; see also Porio v. Dep’t of Revenue, 951 N.E.2d 714, 720 (Mass.

App. Ct. 2011) (explaining that age was not originally included as a protected status in

Massachusetts when the laws barring discrimination were first enacted, but has since been

amended to include age). 225 Cf. Sch. Comm. of Braintree v. Mass. Comm’n Against Discrimination, 386 N.E.2d 1251,

1256 (Mass. 1979) (recognizing a new employment discrimination cause of action to promote

protection against discrimination). 226 See infra note 229–30 and accompanying text. 227 See, e.g., Berr, supra note 19; Farrell, supra note 60; Lucas, supra note 60; McMorris, supra

note 60. 228 Cf. supra note 60 and accompanying text. 229 See Willner, supra note 142 (“[C]ourt-ordered resolution . . . can benefit not only the

immediately affected individuals, but also applicants and employees of other companies

which may revise their practices in light of a systemic enforcement effort.”). 230 See, e.g., Earle et al., supra note 18, at 184–86 (describing disparate impact cases on credit

checks that have been brought and dismissed for administrative reasons). 231 See infra notes 232–36 and accompanying text.


successfully argue disparate impact, the employer’s practice must have a disproportionately negative impact on a recognized, legally protected class.232 Therefore, such a cause of action must narrow its alleged discriminatory impact to applicants in the protected groups.233 As a result, job applicants that do not fit within these categories are excluded from mention in the cause of action.234 If the court ruled against the use of credit checks in hiring decisions by determining that such a practice does create a disparate impact, this holding would be specific to people of that protected group.235 By placing the focus on the effect of this practice on minority groups, the court effectively excludes the impact this practice has on the entire population that has poor credit and does not allow those of low socioeconomic status to be recognized as victims.236

ii. Difficulty in Finding and Selecting At-Risk Plaintiffs

One of the greatest challenges of bringing this case would be in finding a group of plaintiffs who: (1) are within the minority, protected group; (2) applied to the same or similar job at the same company; (3) have bad credit; (4) were subjected to a credit check; (5) that credit check was not reasonably related to that position; (6) that were otherwise qualified for the position; and (7) were not offered the job.237 This could be extremely difficult and time-consuming.238 This option, therefore, runs the risk of not having viable plaintiffs for many years, leaving no protection for applicants in the meantime.239

In addition, there is the challenge of getting past a motion to dismiss and advancing to the discovery stage.240 This would likely rest on the

232 See EEOC TESTS, supra note 10. 233 See id. 234 See MASS. EMPLOYMENT PRACTICE, supra note 23. Since socioeconomic status is not a

recognized protected group, such a holding will not recognize the people outside of the

recognized protected groups that have poor credit scores who are also affected by this

employment practice. See id. 235 See id. (stating that a cause of action for disparate impact requires discrimination against

a recognized protected class). 236 See EEOC TESTS, supra note 10 (defining the scope of the disparate impact claim). 237 See supra Parts I.B.1, III.A.1. (explaining the elements of a disparate action claim and

arguing that employer use of credit checks may provide the basis for such a claim). 238 See Earle et al., supra note 18, at 184–86 (discussing cases brought in other states with

the same allegation that were dismissed due to inability to establish a class of plaintiffs within

the appropriate time frame). This provides the lesson that a case should not be filed unless

and until a viable class of plaintiffs is assembled. See id. 239 See id. 240 See Jeffery S. Gutman, Drafting the Complaint, at 4.1.B.1, SHRIVER CENTER (2013), available

at http://www.federalpracticemanual.org/node/24. Employers can defend against a disparate

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strength of the facts presented by the plaintiffs to demonstrate a sufficient probability of a disparate impact upon further discovery and argument.241 If the case reaches the discovery stage, there is also the risk that there will be little or no documentation supporting the allegations that the use of credit history created a disparate impact.242

Despite the potential difficulties of bringing a case, the ultimate goal of protecting employees can still be achieved even if the case is not successful.243 The importance of bringing awareness to this issue cannot be underestimated because, as awareness increases, so will the number of plaintiffs bringing disparate impact claims.244 This increases the probability that another case will be brought and may place pressure on employers to proactively adjust their policies or seek other avenues to preserve their business interests, such as supporting regulatory legislation like the one proposed by this Note, see infra Exhibit B.245

B. Passing a Statute Restricting Employer Use of Credit Checks

This is a prime time to bring a proposed bill as set forth in Exhibit B,246 as the Massachusetts legislature has been amenable to expanding its protections against discrimination in the past and has proposed bills on this very issue within the past few years.247

impact claim by proving: the practice has a legitimate business purpose in light of the facts

and circumstances of the job in question; the practice is implemented uniformly and produces

no disparate impact; or the plaintiff has not sufficiently established a disparate impact case.

EEOC v. Steamship Clerks Union, Local 1066, 48 F.3d 594, 602 (1st Cir. 1995). 241 See Gutman, supra note 240, at 4.1.B.1. 242 See supra text accompanying notes 164–66; see also, e.g., Sch. Comm. of Braintree v. Mass.

Comm’n Against Discrimination, 386 N.E.2d 1251, 1254 (Mass. 1979) (noting the inherent

difficulty of proving disparate impact by stating that “the more recognizable instances of

discrimination have been labeled cases of ‘disparate treatment’”). 243 See Gutman, supra note 240, at 4.1.B.1. 244 See THE FREE DICTIONARY, http://legal-dictionary.thefreedictionary.com/Test+Case (last

visited Feb. 17, 2015) (defining a “test case” as cases that are brought for the purpose of

establishing new rights and are a helpful foundation to setting new precedent). 245 See, e.g., Willner, supra note 142 (“[V]oluntary or court ordered resolution and

remediation of [discriminatory] practices can benefit not only the immediately affected

individuals, but also applicants and employees of other companies which may revise their

practices in light of a systemic enforcement effort.”). 246 See infra Exhibit B (outlining a new Massachusetts bill on disparate impact). 247 See supra Parts I.E.1–3, III.A.2; see also Porio v. Dep’t of Revenue, 951 N.E.2d 714, 720

(Mass. App. Ct. 2011) (noting the modification of MASS. GEN. LAWS ch. 151B, § 4 (2012) to

include “age” as a protected status).


1. Advantages of Using the Legislature to Protect Against the Use of Credit Checks

As well as the advantages discussed below, a proposed bill would also provide the same, if not stronger, deterrent and awareness advantages as would filing a cause of action.248 Passing the proposed bill, or one substantially similar, best protects employees because it prevents employers from using credit checks as a basis for employment decisions—aside from the narrowly tailored, job-related exceptions—regardless of whether the applicant is a member of a protected group; thus giving widespread protection.249 Under this law, all applicants not subject to the exceptions are protected from review of their credit history.250 This eliminates an employer’s ability to argue business necessity or non-creation of a disparate impact.251 In addition, even those applicants or employees within the exceptions have protections in place to regulate an employer’s use of their credit information and contest perceived discriminatory uses.252

2. Disadvantages of Seeking Protection through Legislation

Like any proposed legislation, there is a risk that it will not pass and employers will continue to use credit checks lawfully.253 This depends on how much influence the business community has on the Massachusetts legislature and how susceptible the representatives are to their arguments in opposition.254 As discussed, employers have many arguments against restricting their ability to use credit checks in making employment decisions255 and members of the legislature whose constituents are mostly employers or business owners may be reluctant to pass such a law.256 The legislature’s failure to pass three prior bills is another indication of the risk inherent in seeking change through legislation.257 However, these proposals may also be indicators that the legislature is realizing the need for such a law.258 In addition, U.S. Senator Elizabeth Warren of

248 See supra Part I.B.2, III.A.2. 249 Compare infra Exhibit B, with Mass. H.R. 1744, supra note 90, Mass. H.R. 3518, supra note

90, and Mass. H.R. 1731, supra note 90. 250 See infra Exhibit B. 251 See infra Exhibit B. 252 See infra Exhibit B. 253 See SCHOOLHOUSE ROCK: I’M JUST A BILL (ABC 1975), available at https://www.youtube.

com/watch?v=H-eYBZFEzf8. 254 See id. 255 See supra Part III.A.1.ii. 256 See McMorris, supra note 60; SCHOOLHOUSE ROCK: I’M JUST A BILL, supra note 253. 257 See supra Part I.E.1. 258 See, e.g., Mass. H.R. 1731, supra note 90; Mass. H.R. 1744, supra note 90; Mass. H.R. 3518,

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Massachusetts is providing a strong example for the state legislature through her proposed bill seeking to ban employer use of credit checks.259 This is a risk the community should be willing to take in order to provide protection to job applicants.260

While employers and business owners are free to express their resistance to potential mandated change, individuals opposed to the suggested changes must consider the actual effect of such legislation.261 First, the proposed bill is not an absolute ban on the use of credit checks.262 Employers are free to craft policies and procedures, so long as these policies fit within the proposed statute’s reasonable requirements that credit checks will be used only for individuals applying for relevant positions as defined and in a manner that does not create a disparate impact.263 As such, employers retain their ability to control and protect their businesses.264 Further, those opposing the bill should find comfort in the fact that the bills that would have created a more absolute ban on the use of credit checks, leaving employers without discretion, have not been passed.265 Any bill that passes will need to defer to employer control to some reasonable extent.266

More importantly, the changes proposed in Exhibit B are changes that are likely inevitable.267 The law is becoming more favorable to employees, meaning that courts may find an employer’s business reasons for certain policies unpersuasive when weighing them against the employee’s interests, should employees choose to assert their rights in court.268 Such

supra note 90. 259 See Shira Schoenberg, Sen. Elizabeth Warren Introduces Bill to Prohibit Companies from

Running Credit Checks on Employees, MASSLIVE (Dec. 17, 2013), http://www.masslive.com/

politics/index.ssf/2013/12/sen_elizabeth_warren_introduce.html. 260 See supra Part I.C. 261 See infra notes 268–72 and accompanying text. 262 See infra Exhibit B. 263 See infra Exhibit B. 264 See infra Exhibit B. 265 See supra Part II.A.2. (discussing the current proposed bills on employer use of credit

checks). 266 See supra Part II.A.2. 267 See infra notes 274–78 and accompanying text. 268 See, e.g., Sch. Comm. of Braintree v. Mass. Comm’n Against Discrimination, 386 N.E.2d

1251, 1253–56 (Mass. 1979) (holding in favor of the employee after balancing the employer’s

business interest of having a limited sick leave policy against a female employee’s interest in

being able to take extended leave for maternity reasons). In so holding, the Court effectively

recognized that it was more important to strike down an employment policy that was

reasonably related to the business in order to reduce barriers to employment. See id. The Porio

Court found that there was a cognizable disparate impact claim alleging that the reduction in


cases, citing employer use of credit checks as the problematic policy, are viable options for employees,269 signifying that employers should consider their business decisions contemporaneously with the rights of employees to be free from disparate impact.270 As such, employers may want to reconsider their opposition to bills like the one proposed or take proactive steps to adjust their policies to eliminate disparate impact.271

CONCLUSION

The era of employer use of credit checks as a way to evaluate potential job applicants and make employment decisions must come to an end. Given the information available on the disparity between minority and non-minority credit ratings—the disparate impact created by use of credit information and the general availability of other evaluative methods—there is simply no need for employers to continue this practice. However, since many employers believe this practice is job-related or a business necessity, it is unlikely that they will shift away from using this practice on their own. Therefore, the law must change, either by way of legislation or cause of action. The judicial and political climate in Massachusetts is ready for proposed cases or bills seeking to restrict employer use of credit checks. The complaint and bill outlined by this Note will pave the way for such change.

force implemented by the employer had a disparate impact on the plaintiff due to his age,

despite the employer’s argument that the reduction was due to legitimate budgetary needs.

Porio v. Dep’t of Revenue, 951 N.E.2d 714, 716–19 (Mass. App. Ct. 2011). 269 See supra Part I.D.2. 270 See Vann, supra note 210 (stating that employers need more guidance on whether their

policies are within the law and, if they are not, guidance to help bring these policies into

compliance). 271 See Willner, supra note 142 (arguing that employers need to update their guidelines and

should put systemic enforcement programs in place to ensure their policies are in compliance

with discrimination statutes).

KARPA_NOTE_18_FINAL


EXHIBIT A

The following is intended to provide a general outline of a complaint alleging that an employer’s use of credit history negatively impacted minority applicants at a disproportionate rate, creating a disparate impact.272

I. Nature of the Action

This is an action under Massachusetts General Laws chapter 151B § 4 (“M.G.L. ch. 151B § 4”) and Title VII of the Civil Rights Act of 1964, as amended 42 U.S.C. § 2000e-2 (“Title VII”), to restrict unlawful employment policies and practices that have a disproportionate negative effect on applicants of particular race or national origin,273 and to “provide appropriate relief to the class of aggrieved . . . job applicants who were adversely affected by such practices.”274 Plaintiffs allege that since [named time], the Defendant [employer] has engaged in a pattern of discriminatory employment practices against [insert race/national origin] job applicants in violation of M.G.L. ch. 151B § 4 and Title VII.275

II. Statement of the Claims

In this section of the complaint, the plaintiff must allege that the defendant employer, as identified in the “parties” section of the complaint, has engaged in unlawful employment practices in violation of M.G.L. ch. 151B § 4 and during what time period.276 Next, the complaint must explain, with sufficient particularity,277 the specific discriminatory practice used by the employer, its discriminatory effect, and on which particular protected group.278 In addition, the complaint should allege that credit history is not

272 See infra Exhibit A.I. Note that the “jurisdiction and venue” and “parties” sections have

been excluded in order to focus the outline on the substantive disparate impact issues. See

infra Exhibit A.I. 273 See, e.g., Complaint at 1, EEOC v. Freeman, 2011 WL 337339 (D. Md. Jan. 31, 2011) (No.

RWT 09cv2573) [hereinafter Freeman Complaint]; Complaint at 1, EEOC v. Kaplan Higher

Educ., Inc., 790 Supp. 2d 619 (N.D. Ohio 2011) (No. 1:10 CV 2882) [hereinafter Kaplan

Complaint]; see also MASS. GEN. LAWS. ch. §151(b) (2012); 42 U.S.C. § 2000e-2(k) (1964). 274 Freeman Complaint, supra note 273; Kaplan Complaint, supra note 273. 275 See, e.g., Freeman Complaint, supra note 273, at 1; Kaplan Complaint, supra note 273;

supra Parts I.C.1–2. 276 See supra Part I.B.1; see also, e.g., Freeman Complaint, supra note 273. 277 Gutman, supra note 240, at 4.1.B.1. 278 See supra Part I.B.1; see also, e.g., Freeman Complaint, supra note 273, at 2–4. For example,

this complaint alleges that the defendant employer has “subjected a class of aggrieved Black

job applicants . . . to an ongoing pattern or practice of discriminatory failure to hire,” by its use


related to the position applied for or consistent with the business necessity of the company; therefore, any use of such information is merely pretextual.279 The complaint should also allege that there are less-discriminatory evaluation mechanisms employers can use to select which job applicant to hire.280 The following is an outline of the claims:

Since [insert date range of alleged discriminatory use of credit checks], Defendant [employer] has consistently used an employment practice which has had the effect of disproportionately excluding plaintiff’s [state race/national origin] from employment.281 Specifically, the defendant has “used, and continues to use, credit history information” as part of its hiring process, which “has had, and continues to have, a significant disparate impact on [these] job applicants.”282 Studies show that [name group] generally has lower credit ratings than people of other races or national origin, and that this practice is not related to the job and is not a business necessity.283 In addition, there are less-discriminatory alternatives available to the employer.284

III. Prayer for Relief

The complaint should respectfully request that the court find the employer’s use of credit checks unlawful because it creates a disparate impact, and therefore request the court permanently enjoin the defendant from discriminating against persons within a protected category by using hiring practices that have a disparate impact on these applicants.285

of credit history as a selection criteria for hiring. Id. 279 See EEOC v. Steamship Clerks Union, Local 1066, 48 F.3d 594, 602 (1st Cir. 1995); see also,

e.g., Freeman Complaint, supra note 273, at 2. 280 See Freeman Complaint, supra note 273, at 3–4. 281 See id. 282 See id. In order to prove their claims, the plaintiff will need to provide studies that

demonstrate the disparate impact of employer use of credit checks on their protected class. 283 See id. 284 See, e.g., EEOC TESTS, supra note 10 (outlining the different types of tests used to

evaluate applicants, which are typically specific to the position, including cognitive,

personality, medical, physical ability tests). 285 See Freeman Complaint, supra note 273, at 5.

KARPA_NOTE_18_FINAL


EXHIBIT B

This bill primarily draws from the strongest of the three proposed Massachusetts bills and seeks to remedy the problematic aspects.286 The proposed bill is as follows:

A BILL RESTRICTING EMPLOYER USE OF CREDIT CHECKS AND

OUTLAWING THE DISCRIMINATORY USE OF CREDIT CHECKS

PREAMBLE: The purpose of this bill is to “prohibit employers from discriminating against” all current and potential employees, based on their credit or financial history or report.287

SECTION 1. Chapter 93 of the General Laws is amended by inserting after section 51A the following section:

Section 51B. (a) Except as provided in paragraph (b), no person, including an employer, prospective employer, employment agency, employment screener or licensing agency, shall:

(1) use a consumer report in connection with or as a criterion for an employment purpose, including decisions related to hiring, termination, promotion, demotion, discipline, compensation, or the terms, conditions or privileges of employment;

(2) request or procure a consumer report for the purposes described in clause (1);

(3) ask an employee or applicant about his or her consumer report or about any information contained therein regarding credit worthiness, credit standing, or credit capacity.

(b) The provisions in paragraph (a) shall not apply if an employer is required by federal or state law to use a consumer report for employment purposes.

(c) Notwithstanding paragraph (b) of this section, an employer shall not use a consumer report in a manner that results in adverse employment discrimination prohibited by federal or state law, including chapter 151B of the General Laws and Title VII of the Civil Rights Act of 1964.

(d) If an employer obtains, uses, or seeks to obtain a consumer

286 See supra Parts I.E.1–3, II.A.2. This proposed bill draws from these prior proposed bills

for two reasons: (1) combined, these bills sufficiently address the disparate impact created by

the unregulated use of credit checks; and (2) using bills that have already received support

from Massachusetts legislatures as a backbone gives this bill a stronger chance at garnering

strong support. See supra Parts I.E.1–3, II.A.2. 287 See Mass. H.R. 1731, supra note 90.


report pursuant to paragraph (b) of this section, the employer shall:

(1) obtain the employee’s or applicant’s written consent, in a document consisting solely of the consent, each time the employer seeks to obtain the employee’s or applicant’s consumer report;288

(2) explain which job requirements this report will be used to evaluate;

(3) explain if, and why, an adverse employment action is being taken

against that person based on their credit information;

SECTION 2: Remedies.

[(a)] Any person aggrieved by a violation of [Section 1] shall be entitled to file a complaint with the Massachusetts Commission Against Discrimination, under chapter 151B of the General Laws.

[(b)] Failure to comply with the provisions of this section shall constitute an unfair practice under the provisions of clause (a) of section 2 of chapter 93A.

[(c)] No person shall retaliate, discriminate, or take any adverse action against an employee or applicant on the basis that the employee or applicant has or intends to:

(1) file a complaint pursuant to paragraphs [(a)] or [(b)] of this section;

(2) allege that the person violated any provision of this section;

(3) testify, assist, give evidence, or participate in an investigation, proceeding or action concerning a violation of this section; or

(4) otherwise oppose a violation of this section.

[(d)] No person shall require or request an employee or applicant to waive any provision of this section. Any such waiver shall be deemed null, void, and of no effect.

SECTION 3. Subsection (a) of section 51 of chapter 93 of the General Laws, as appearing in the 2010 Official Edition, is hereby amended by inserting after the words “employment purposes,” in line 12 in clause (3)(ii), the following words: “subject to the provisions of section 51B of this chapter;”

SECTION 4. Section 5 of chapter 151B of the General Laws, as appearing in the 2010 Official Edition, is hereby amended by inserting after the words “and seventy-two,” in line 4, the following words: “, or section 51B of chapter 93.”289

288 Mass. H.R. 1744, supra note 90. 289 See id.

karpa: “an equal opportunity employer”

Documents

credit information

lower credit scores

distribution of credit

negative impact

massachusetts legislative

minority job applicants

statistical information

employers ability