SAN FRANCISCO (CBS.MW) -- Americans eyeing a growing stack of late bills likely aren't worrying about their next job interview.
They should.
A poor credit history was enough to ruin Brenda Matthews' job prospects at Johnson & Johnson, according to her lawyers.
Matthews got a job as a patent specialist in Johnson & Johnson's New Brunswick, N.J., headquarters and gave her employer notice; Two weeks later Johnson & Johnson rescinded the offer because of her credit history, said Rachel Geman, an attorney with Lieff, Cabraser, Heimann & Bernstein, which is representing Matthews, along with law firm Outten & Golden.
The lawyers say Johnson & Johnson's use of credit checks to screen applicants discriminates against African-Americans who've historically had less access to credit than whites.
Matthews, an African-American, filed a discrimination charge this week with the Equal Employment Opportunity Commission.
"It compounds an already unfair situation. African-Americans have been subject to historic discrimination in the credit market. For that to be compounded in the job market is a real inequity," Geman said.
Johnson & Johnson (JNJ: news, chart, profile) said in a statement that the company couldn't comment on the EEOC filing, but that Matthews applied for the position of tax specialist in the company's global patent office, a job "involving the timely payment of fees."
Next move: EEOC
For now, Matthews and Johnson & Johnson must wait for the EEOC to assess whether a valid claim exists. If so, the parties might go to mediation, or to a full-blown lawsuit.
In some previous cases, the EEOC has found that checking the credit of job applicants is discriminatory.
"It's our position that excluding people with poor credit may have a disparate impact on some minority groups and therefore may be discriminatory under civil rights law, but that is assessed on a case-by-case basis," said David Grinberg, an EEOC spokesman.
"For the employer to justify such a policy, it would need to show that the use of credit records is job-related and consistent with business necessity," he said.
For Matthews' lawyers at least, perfect credit is rarely, if ever, a business necessity.
Said Adam Klein, of Outten & Golden and co-counsel on the case: "From the employer's perspective, it would be nice for all employees to have perfect credit ... but it's not consistent with business necessity."
Popular screening method
But more and more companies see credit checks as a valid way to gauge whether a job applicant is up to snuff, partly because of greater security concerns and partly because such reports are easily and quickly accessible thanks to improved technology.
Still, federal law requires employers to secure job applicants' permission before accessing credit files.
Thirty-five percent of companies use credit checks in pre-employment screening, up from 19 percent in 1996, according to a survey of 208 companies by the Society for Human Resource Management.
Meanwhile, about 41 percent of retailers said they used credit checks in pre-employment screening, according to the 2003 National Retail Security Survey, conducted by the University of Florida.
About 10 percent of retailers plan to increase their use of credit checks in the coming year, putting it among the top five screening policies that retailers intend to ramp up, according to the study.
The industries most interested in credit checks are defense, chemical, pharmaceutical and financial services, said Donald Girard, a spokesman with Experian, one of three credit-reporting agencies that sells reports to employers.
Experian creates specific employment reports that don't include credit scores, birth dates or spouses' information.
Bad credit = bad apple?
But another question underlies the use of credit checks: To what degree does credit history predict job performance, or a penchant for stealing or other negative habits?
"Credit scores have nothing to do with job performance," said Bill Lann Lee, former assistant attorney general for civil rights under the Clinton administration, a partner at Lieff, Cabraser, Heimann & Bernstein, and one of Matthews' lawyers.
Lee pointed to an Eastern Kentucky University study of 200 employees in which credit history was not an accurate predictor of job performance.
But employers say credit checks are a useful part of an overall pre-employment screen. "For jobs where there is access to money, it's really a way to help minimize organizational risk," said John Dooney, human resources manager at the Society for Human Resource Management.
With applicants that "may have a lot of debt or they may not have been paying their bills on time, there's a higher risk that they might be more susceptible to stealing or theft," Dooney said.
"It doesn't mean that's always the case, but it's a way to manage the risk a bit better," he said.
Others agreed. "You do get an indication of honesty generally. The proverbial label for people who don't pay back their debts is deadbeat," said Richard Block, a partner at Pillsbury Winthrop and co-chair of its employment and labor law practice, which represents employers.
Still, Block acknowledged "there could be a multiple number of reasons why someone who has full integrity could have financial problems from time to time."
Yet employers don't always take the time to assess the reasons behind negative credit history. "If employers are hiring a significant number of employees, a lot of them won't take the effort and the cost," Block said.
"It also depends on how desperate the employer is to fill the job," he said. Faced with many top-notch job applicants, Block said, the employer is "not going to bother to talk to the one or two that did not come up OK on the credit report."