From a practical standpoint, the choice can be significant. Everything changes once an employer enters into the housing equation of an employee. To keep the costs of a relocation in check, the employer needs for the employee’s home to be sold as quickly as possible. Otherwise, the employer is put in the uncomfortable position of having an employee who, most often, cannot afford to purchase a new residence where he or she currently is working.
If the home cannot be sold, the employer may have to provide extended temporary housing for the employee because he or she cannot afford to pay for both the new mortgage and the one on the residence back home.
From an HR perspective, the employer also has an employee who may be separated from the family for an extended period of time because the spouse stayed behind to get the home sold. This results in the need for more visits back to the old location. And, even if the family moves, it is living in temporary housing or a rental unit, which never is like the nice house back home. If the employee rents in the new location, the employer still may incur the costs of duplicate housing payments. The employee also may need extended storage of household goods. Then there are issues with the left-behind home as it continues to require maintenance and attention while it lingers on the market.
While the employee also wants the home sold as quickly as possible, he or she is looking to maximize the sales price of the home in order to buy the home in the new location. The employee may not be knowledgeable of or realistic about the fact that housing prices have declined dramatically in the area. He or she may have unrealistic expectations about what the home will sell for in the current market. If the employee also is underwater on the mortgage because of falling housing prices, he or she is further stressed.
The employer may have a relocation policy that could aid the potential employee with certain situations, including a “loss-on-sale” provision. However, if the limits of those provisions, which generally are reported to be in the mid-teens to in excess of $50,000, are not enough to cover the employee’s losses, that can lead to having to make exceptions to the relocation policy. The longer the home is on the market, the more issues that arise.
While these issues are not new in relocation, they certainly are exacerbated by the softness of the current housing marking. Ultimately, for the employer, the business issues are money and productivity of the new employee.
One Solution
One solution to this dilemma is for an employer to determine the salability of the employee’s residence before an offer is ever made by having a pre-hire marketability assessment completed. But can an employer legally do that? The simple answer is yes.
What laws would apply to making an employment decision based on a factor like the salability of an employee’s home? Is it against the law to discriminate against a potential employee because of the marketability of the home? There is nothing directly in the employment discrimination laws that restricts or prohibits employment decisions from being made based on housing salability.
The main federal discrimination law provisions that are applicable to employment situations are the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act, the Pregnancy Discrimination Act, and the Genetic Information Nondiscrimination Act of 2008. These various laws prohibit discrimination in employment on the basis of race, color, religion, creed, national origin, sex, age, disability, pregnancy, childbirth, and genetic information.
Various state discrimination laws add additional categories to these prohibited bases of discrimination, including ancestry, sexual orientation, marital status, height, weight, arrest and conviction records, and membership in the military. None of these statutes—federal or state—make it illegal to select one person over another because the employer reasonably believes that it may be more difficult or expensive to hire an individual because of issues with an existing home.
Even though the applicable laws do not specifically prohibit using housing salability as a criterion in selecting employees, there is some general sense that “you cannot do that.” Some of this stems from the Equal Employment Opportunity (EEOC) Pre-Employment Inquiry Guidelines, issued in 1981, which suggest that an employer not ask a potential employee about credit issues, financial condition, or homeownership, including whether the applicant owns or rents the home.
The reason for avoiding asking these particular questions is that these factors were found to result in discrimination against minorities because, per the EEOC, more non-whites than whites are below the poverty level. However, as the title says, these are “guidelines,” not requirements and, as long as the questions being asked do not directly reveal race, color, national origin, creed, religion, or sex, they are not in the “per se” questionable category. In fact, a review of the EEOC’s own website revealed an informal opinion letter dated May 9, 2006, that provides: “although some state laws may prohibit discrimination based on place of residence, federal EEO laws do not (No such state laws have been identified.). Note, however, that Title VII would be implicated if applicants were excluded from employment because they live in an area that is comprised primarily of a particular racial or ethnic group.”
If discriminating solely because of where a single residence is located is not prohibited, it follows that making employment decisions based on the marketability of the residence also is not prohibited.
In addition, if the employer can show that there is a valid business reason for asking the types of questions necessary to perform a marketability assessment on the applicant’s residence or, in the case of the ADEA, that the marketability assessment is a reasonable factor other than age on which to base an employment decision, then it would be allowable.
A Valid Business Reason
Although there is no specific law on point, the fact that the employer is going to incur costs and expenses to relocate a potential employee should create a valid business reason to ask the questions that form the basis for the market analysis. These questions would include the location of the employee’s residence, homeownership, the mortgage that exists on the home, and related matters such as the purchase price that the employee would expect for the home. Using the answers to these questions, the employer, either directly through local real estate professionals or indirectly through the employer’s relocation company, can assess the salability of the potential employee’s residence before he or she is hired through a preliminary market analysis.
It would not be necessary or desirable to perform a housing marketability assessment on the residence of every single applicant for a particular position. Under the EEOC’s Compliance Manual, the key to making selection decisions is to treat similarly situated applicants the same based on where they are in the application process. Therefore, when an employer reaches the final stages of the selection process, if the marketability analysis is performed on one applicant’s residence, it should be performed on the residences of all other applicants under consideration.
The other consideration for using this analysis as part of the selection process would be to have some clearly established guidelines about how the analysis will be used. Those employers with relocation policies already have this well in hand. The initial market analysis will enable the employer to look more closely at how a potential employee’s housing situation fits within the employer’s relocation policy.
If the market analysis indicates that a potential employee is significantly underwater on the mortgage and the relocation policy does not include a “loss-on-sale” provision, then that person may not be the best choice as his or her needs may not be met without significant exceptions to the employer’s policy. By using the process of a market assessment, the employer or relocation company also can engage in a dialogue with the employee with respect to these issues. If the employee ultimately is selected for hire, this gives him or her a better understanding in advance of what the employer’s relocation policy provides for in these types of difficult situations.
Are there any other legal concerns about obtaining information about a potential employee’s residence? If an employer asks the employee about his or her credit or mortgage situation and then requests a credit report from a credit reporting agency to verify the information, the employer would need to meet the requirements of the Fair Credit Reporting Act (FCRA) with respect to notice to the employee. If the employer simply relies on information from the employee, there is no such requirement.
In addition, because a real estate professional is not a “credit reporting agency” as defined in the FCRA, there is no legal requirement that the employer obtain the applicant’s consent before a marketing analysis is completed. Much of the information that is used in such an assessment is comparable market information from public records or the opinions of the involved real estate person.
With only the applicant’s address, sufficient information may be available to conduct a preliminary market assessment. However, a more complete analysis based on verified information may be preferable. Although Washington state currently restricts the use of credit reports for employment purposes and at least four other states are considering doing so, this option generally still is available to employers.
Which employee ends up being hired—the one with the salable home or the one with the big mortgage in a declining market? One relatively simple task—having a pre-hire marketing analysis performed on an applicant’s residence—may help answer the question by assisting the employer in determining that it is economically unfeasible to hire a particular person based on the individual’s current housing situation. It is well worth considering this step when hiring.
The preceding is intended as general information only; it is not legal advice. Worldwide ERC® suggests that you consult with your own tax or legal advisor as appropriate.
Marian Weilert Sauvey, Esq., is an attorney who serves as the general counsel of Atlas World Group, Inc., Evansville, Indiana, and its subsidiaries, including Atlas Van Lines, Inc. and Cornerstone Relocation Group, L.L.C. She can be reached at +1 812 424 4326 ext. 2255 or e-mail marsauv@atlasworldgroup.com.