Companies that tolerate discrimination—whether in the workplace or in lending—risk legal and reputational consequences.

The U.S. Equal Employment Opportunity Commission (EEOC) enforces federal laws prohibiting discrimination against a job applicant or an employee during a variety of work situations, including hiring, firing, promotions, training, wages, and benefits.

AAPL’s own Code of Ethics takes this a step further: Members may not discriminate against any party based on their status as part of a protected class. This higher standard encompasses employees, clients, partners, investors, etc., and uses federal definitions of discrimination (employment, lending, and other civil rights) to apply to these expanded parties.

Discrimination Basics

Several federal laws currently address discrimination, including:

• Title VII of the Civil Rights Act of 1964 makes it illegal to discriminate against someone on the basis of race, color, religion, national origin, or sex. This law also protects employees against retaliation for going forward with a claim regarding discrimination in the workplace.
• The Pregnancy Discrimination Act is an amendment to Title VII that expands the protections regarding “sex” to include prohibiting sex discrimination on the basis of pregnancy, childbirth, and/or a medical condition related to pregnancy or childbirth.
• The Equal Pay Act of 1963 (EPA) prohibits sex-based wage discrimination between men and women who perform equal work in the same workplace.
• The Age Discrimination in Employment Act of 1967 (ADEA) protects employees or future employees who are 40 or older from discrimination in the workplace.
• Title I of the Americans with Disabilities Act of 1990 (ADA) makes it illegal to discriminate against a qualified person with a disability from employment or during employment.

These laws are the basis of how the EEOC enforces discrimination in the workplace. Court law interpretation and amendments to these laws are evolving.

Many of the state laws currently in place are similar to federal civil rights laws but may offer additional protections against employment-related discrimination—federal law is the minimum standard. Almost all states have adopted discrimination laws related to employment, with protection against discrimination based on factors such as race, gender, age, marital status, national origin, religion, or disability. If a state does not explicitly state their employment protections against discrimination, the individual who is reporting the discrimination would refer to federal law regarding the type of discrimination in question.

Changing Times

Under the fair employment practices law, employers cannot discriminate based on pregnancy, childbirth, pregnancy-related conditions, race, color, sex, age (40 and older), religion, national origin, disability, sexual orientation, or gender identity. Specifically, employers cannot refuse to hire, promote, discharge, demote, terminate, or harass employees.

In the lending industry, these laws apply whether for an employer or for a lender lending to borrowers and other service industries.

In the private lending industry, some investors may believe that because the funds (money) are their own, they can lend to whomever they want. Some private lenders or investors who use their own funds discriminate from the person or even the location of the property (redlining).

Federal law and AAPL do not distinguish whether discrimination is happening based on the source of the funds being used, just as a privately owned business can’t discriminate on who they hire just because they are using their own money to do so. If the result is that a member of a protected class is not receiving a loan from your company based on a quality unique to their protected class, it is discrimination. (See Susan Naftulin’s article regarding redlining and discriminatory lending practices at aaplonline.com/ethics for more detailed information.)

The one with money does not get to bypass the ethical way to lend.

Each state has its own laws that define discrimination and the consequences to the employer for not following through or for turning a blind eye. The consequences range from fines from the state, loss of business from clients, and even reputational damage. AAPL, in turn, may suspend or permanently revoke membership, among other repercussions.

Basic discrimination laws are the same; however, private lenders are scrutinized by the association and peers because our industry historically has not always been the best in this area. In banding together as an association, we have collectively decided to work together to provide credibility to the industry and to show how we benefit real estate investors. Discrimination in any fashion in our industry does not achieve this objective and will not be tolerated.

Beware of Online Repercussions

For those still not won over by “it’s the law” or “our industry will not tolerate it” or “it’s the wrong thing to do,” social media prevents instances of discrimination from being brushed under the rug. Those traditionally seen as powerless in these situations—individuals—may now tell the world directly about their experience. Reputations are earned and lost because word of mouth these days occurs more online and instantly than it does in person.

And in these cases, the mantra “all publicity is good publicity” is simply not true. Companies that have been in the social media limelight due to discrimination grievances include Google, Amazon, McDonald’s, Bloomberg and a long list of others. Even though these are large companies, they still lost revenue and took a hit to their reputation. Some people still boycott these companies.

Being small does not allow a company to hide from the consequences of discrimination. All companies, large or small, must be diligent about nondiscrimination practices. In fact, smaller companies face steeper repercussions; the vacuum left by their fall is much more easily filled by competitors and their services than it is for the global giants mentioned previously.

Prevention

No one walks around thinking “I’m discriminating against this person because they belong to this class I don’t like.” Instead, discrimination tends to arise out of the following kind of thinking:

“This kind of borrower is so much easier to work with, so I’ll focus my marketing on them.”

“I always seem to have issues when I lend in this neighborhood, regardless of the borrower, so I’m just not going to lend there anymore.”

“If I’m not targeting an individual specifically with my words/actions, it’s not hurting anyone.”

The list of how discrimination can present itself is endless. So how do you prevent it?

1. Identification. Ask yourself if, at any time during and in any aspect of your professional dealings, you find yourself saying “no” to people who, if put together in a room, could fall into a protected class. It doesn’t matter if you are saying “no” to them for different reasons, and you can replace “saying no” for “acting in any way different than you do for people not in that group” and have it hold true. This is discrimination, includes both words and actions, does not have to be on purpose to be discriminatory, and can be “something you’ve always done and no one ever had a problem with it before.”
2. Review and Replace. If you can say “I do the above, but I didn’t realize I was doing it,” figure out where the practice is originating. Is it an unintended consequence of XYZ process? Mitigate the cause, whatever it is, and then periodically revisit to ensure discrimination hasn’t unknowingly cropped up again.
3. STOP. If you can say, “I do the above and it’s intentional, but [reasons I’m justified],” STOP. You are in the wrong. You are not acting ethically. There is nothing that can justify how you are acting. Your intentions do not outweigh the end result.

Every company, regardless of what kind of hiring, work, lending culture, and criteria they have or how well they think their policies protect them from discriminatory outcomes, should periodically review. Set a benchmark. Create a list of checkboxes, questions, etc., to run through, and be brutally honest and detailed in answering. It’s easy to slowly adapt to something that evolves over time—it gradually becomes your “new normal.” Do not let a culture of discrimination become yours.