The term unemployment discrimination refers to the practice of excluding out-of-work individuals from consideration during the hiring process. Unemployment discrimination occurs when a job posting, or internal review process, only considers working individuals as qualified candidates.
Under federal law, companies are not prohibited from practicing unemployment discrimination; however, several states, such as New Jersey and Oregon, have passed laws making it illegal to discriminate against the unemployed during the hiring process.
While federal protections are offered to individuals based on their age, gender and race, companies that screen out unemployed workers can still face discrimination claims. This can happened through what is termed a disparate impact charge. For example, if a federally protected group such as African Americans' unemployment rate is higher than average, then excluding the unemployed from consideration causes a disparate impact on that group. For this reason, companies with such practices are at risk of a lawsuit.