This article concerns employers’ use of credit checks to determine whether an applicant should be hired and how such conduct should be regulated. Under some circumstances, using credit checks to determine who to hire negatively impacts minorities at a disproportionate rate. Studies show a correlation between credit and race, revealing that minority groups, namely African Americans and Latinos, tend to have a pattern of proportionately worse credit than non-minority groups. Employers increasingly use credit scores as a factor when making employment decisions, causing many people’s credit score to take a hit. Consequently, people with poor credit have a tougher time finding work, thereby subjecting them to a vicious cycle of being unable to establish financial security from a paying job, negatively impacting their credit and reducing their perceived employability. As a result, the Massachusetts legal community has proposed legislation to remedy this discriminatory practice.
Karpa argues that although the proposed bills are a step in the right direction, they either fail to provide adequate protection or fall short of recognizing the full extent of the problem. Karpa contends that currently Massachusetts case law neglects to resolve the problem of employers using credit checks in making hiring decisions for two reasons. First, the issue has not been formally recognized by the Court as a discriminatory practice because a case of this nature has yet to be brought before a Massachusetts court. Second, discrimination claims only concentrate on protected classes which Massachusetts recognizes only as race, religion, gender, age, and disability. Socio-economic rank is not a protected class. Karpa argues that all is not lost; over the years Massachusetts discrimination law has expanded in its recognition of additional classes of protected groups, eventually accommodating gender, disability, and age as immutable characteristics protected and subject to the laws regarding disparate impact.
Across jurisdictions, courts have attempted to strike a fair balance in disparate impact cases between the interests of potential employees and employers. In the past, Massachusetts has balanced the business interests of the employer against the disparate impact alleged, typically finding for employers. Karpa urges that there are two realistic legal options for eliminating the negative impact of credit checks on potential employees in hiring decisions. One option is to declare the practice unlawful by bringing a case. The second option is to propose a statute that renders the practice illegal.
Karpa analyzes the advantages and disadvantages of each option. In respect to option one, Karpa argues that disparate impact law in Massachusetts has expanded in scope to protect additional classes; this provides a foundation for the argument that credit checks are a source of discrimination, rendering affected employees worthy of the status of a protected class. Regarding the second option, Karpa contends that passing a bill is the most protective option because it broadly bars employers from using credit checks when making hiring decisions—aside from narrowly tailored, job-related exceptions regardless of whether the applicant is part of a protected class.
This article will be published in Volume 50, Issue 1 of the New England Law Review.