Labor and Employment Law Weekly Update

27 December 2010 Publication
Author(s): Christina M. Kennedy Jeffrey S. Kopp

Legal News: Employment Law Update

Employers Should Be Wary of Credit Checks
By Christina Kennedy

Many employers require background and credit checks for their prospective employees. Increasingly, civil rights advocates and the EEOC have raised questions concerning the discriminatory impact of these practices. Under the disparate impact theory of discrimination, a seemingly neutral policy has a greater impact on protected individuals than those individuals not protected. When a claim of disparate impact is made, the employer must prove that the practice, in this instance credit checks, serves a legitimate business necessity.

A recent case filed in the Southern District of Florida illustrates this point. Loudy Appolon filed a class action against the University of Miami alleging that the school used credit report checks in a manner that discriminates against African American and Latino applicants. Ms. Appolon, an African American, applied for a senior medical collector position with the University of Miami, Miller School of Medicine. She received a conditional offer of employment, contingent upon a successful background check. Prior to beginning her employment, but after she quit her previous job, the University of Miami withdrew its offer of employment based off the results of her credit report. Ms. Appolon contends the credit report relied upon by the University of Miami contained errors, but she corrected the errors with the credit reporting agencies. According to Ms. Appolon, the corrected report showed she had no active credit problems or other problems relevant to the position she was offered.

The crux of Ms. Appolon’s argument is that the use of credit reports disparately affects African American and Latino applicants. Her claim echoes the recent public meeting ( the EEOC held exploring the use of credit histories as employee selection criteria. The Commission heard from a diverse set of experts. Chi Chi Wu of the National Consumer Law Center (NCLC) expressed grave concerns that the use of credit histories is mushrooming at the time of economic instability for many Americans, noting that the use of credit histories “create[s] a fundamental ‘Catch-22’ for job applicants,” especially during this period of high unemployment and high foreclosures, both of which have a negative impact on credit.” She observed, “You can’t re-establish your credit if you can’t get a job, and you can’t get a job if you’ve got bad credit.” This view was echoed by several witnesses.

In addition to the lawsuit filed against the University of Miami, last week the EEOC itself filed a nationwide class action lawsuit against Kaplan Higher Education Corporation in federal court in Cleveland.

Given the various legal challenges, here are some tips for employers:

  • Consider using credit checks selectively.Employers should look for a business-related justification for requiring the credit report that they can offer in the event of a challenge. For example, for employees who work in accounting or around cash, a business reason is easy to state.
  • Use a credit check as one of many factors in making a decision. Focusing on other factors, such as references, gives the employer a broader snapshot of the applicant.
  • Give the applicant an opportunity to explain credit information.Credit reports may contain mistakes. Additionally, some credit issues may be less concerning for employers, such as issues relating to an unexpected stay in the hospital.
  • Remember that credit checks implicate more than disparate impact claims.When using credit reports, employers also must be mindful of the requirements of the Fair Credit Reporting Act( as well as other state laws limiting an employer’s use of credit information.

Implementing a Drug and Alcohol Testing Program — Things to Consider
By Jeffrey S. Kopp

Employee and applicant drug testing is a tool employers have to ensure their workforce is drug-free. Studies have shown employers lose between $60 and $100 billion annually because of employee drug abuse. The costs result from lost productivity, increased absenteeism, drug-related accidents, medical claims, and theft. Proponents claim that testing helps control insurance costs, reduces workplace injuries, reduces workers’ compensation premiums, and helps avoid negligent hiring and retention claims. Other employers implement drug testing in order to compete for federal contracts or to meet requirements of certain Department of Defense contracts, or they may be subject to Nuclear Regulatory Commission ( or Department of Transportation ( testing programs.

Employers must consider a variety of factors when implementing a drug and alcohol testing program and determine the following:

  • Why is the program being implemented?
  • Who will be tested? Applicants only? All employees, or merely those in safety- or security-sensitive positions?
  • What types of tests will be given?
  • What substances will be tested for?
  • Who will administer the tests?
  • What are the consequences of a positive test?

Probably the most important of these considerations is the type of drug test that will be used, including:

  • Pre-employment testing — Given before employment to determine whether the applicant is using illegal drugs. This testing is becoming more common as a front-line deterrent in preventing drug-abusers from entering an employer’s workforce.
  • Reasonable suspicion — Given when an employer has a reasonable basis to suspect an employee is using drugs or is at work under the influence.
  • Post-accident — Given after an employee is involved in an accident at work.
  • Random — Given on an unannounced basis and employees are selected for testing on a random basis.
  • Follow-up — Given on a scheduled or random basis when an employee returns to work after completing rehabilitation or counseling for substance abuse.
  • Periodic — Given at specified times, such as for employees who have been returned to the workforce after testing positive or generally for employees in safety- or security-sensitive positions (i.e., drivers).

A good testing policy will clearly describe the prohibited conduct and the consequences for such conduct. It must have a clear statement as to the consequences of a positive result or for the refusal by an employee to take a required test. If an Employee Assistance Plan ( (EAP) is part of the policy, one element should include referral to the EAP. The policy should be communicated to employees and supervisors. Employees should be required to separately sign the policy even if they are already required to sign a general acknowledgment of receipt of a policy handbook. Supervisors should be instructed regarding testing procedures and privacy issues.

Employers must consider whether there are any state or local laws or regulations concerning drug and alcohol testing. Some states have mandatory laws governing the conduct of drug and/or alcohol testing. For example, Maine requires employers to submit their drug and alcohol testing policies to the Maine Department of Labor for approval prior to implementing such policies. Minnesota, Rhode Island, Vermont, and Boulder, Colorado, prohibit certain types of testing. Other states and localities such as San Francisco, California, and Boulder, Colorado, prohibit random testing, and other states, including Maryland, Minnesota, Louisiana, Oklahoma, and North Carolina, among others, have requirements concerning the procedures to be followed in drug and alcohol testing. Employers should check with employment counsel to ensure state or local laws do not restrict their ability to test employees.

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