2014's Top Background Screening Trends

Hiring Expert on Risks around Commercial Databases
2014's Top Background Screening Trends

Organizations need to be wary when using commercial databases for potential employees' background checks, says Les Rosen of Employment Screening Resources, detailing the top screening trends for 2014.

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"[Some] databases out there are put together by proprietary firms that aggregate millions of records from various sources throughout the country," says Rosen, founder and CEO of the firm Employment Screening Resources, in an interview with Information Security Media Group [transcript below].

Those sources include prison systems and county courts to state agencies that collect records. "Some of those databases in some states are pretty good," he says. "But in other states - for example, New York, California and Texas - these databases aren't very good at all."

The problem is complex. "Number one, employers can develop a false sense of security thinking that because they're running a commercial database, they're somehow getting the real thing," Rosen says. "These commercial databases are not the official FBI records. One can only get FBI records if authorized by law. You could have false negatives and false positives."

Another issue with commercial databases is that criminals can fall through the cracks.

"You can have people who really are criminals and, because of the way these databases are assembled, [including] issues with completeness and accuracy ... a person with a criminal record the employer [may] consider, which is just as bad," he says.

In an interview about risk management and the latest screening trends, Rosen discusses:

  • Highlights of the latest report;
  • New views on the relevance of past criminal records;
  • Emerging legal and compliance implications of background screening.

Rosen, a retired attorney, founded ESR in 1996. In 2003, ESR was rated as the top screening firm in the U.S. in the first independent study of the industry - a research report prepared by the Intellectual Capital Group, a division of HR.com. Rosen is a consultant, writer and frequent presenter nationwide on pre-employment screening and safe hiring issues. He has testified in the California, Florida and Arkansas Superior Court as an employment screening expert on issues surrounding safe hiring and due diligence. He is the author of "The Safe Hiring Manual-The Complete Guide to Keeping Criminals, Imposters and Terrorists out of the Workplace." He is also the key presenter in the webinars Risk Management: New Strategies for Employee Screening and Avoid Negligent Hiring - Best Practices and Legal Compliance in Background Checks.

Background Screening: Top 10 Trends

TOM FIELD: What do you find to be unique about this year's trends in background screening?

LESTER ROSEN: What we're seeing in 2014 for the first time is that the trends have solidly coalesced under one title, and that title would be legal compliance, as well as accuracy. In the past when we talked about trends, we might have talked about different tools that were used, certain things happening in the industry; but this year the trends focus with laser-like precision primarily on the whole idea that background screening is an endeavor that deals with human resources, labor law and discrimination issues, and it all comes down to legal compliance. Legal compliance can mean compliance with federal and state laws that control background screening, it could mean concerns about accuracy because accuracy impacts information concerns, and of course the Equal Opportunity Commission's guidance of 2012 continues to reverberate this year in terms of discrimination.

The trends this year solidly underscore the fact that background checks no longer have the vending machine model where you say, "Here's a dollar, give me a piece of data that I can now use." That's the old days. Now it's squarely in the realm of what can employers legally use, how can they legally obtain it, what is the legal standard of accuracy so it's usable, and what are the legal aspects of even using it in the first place. What are the rules, particularly of the FCR, the Fair Credit Reporting Act, in terms of obtaining it and using it? So that's what we're seeing in 2014, and it's all about the law.

Top Three Trends

FIELD: What are the top three trends?

ROSEN: The top three trends this year on our list of what we think is going to have the biggest impact on employers begins with this idea of ban-the-box. Ban-the-box is a movement and has to do with trying to get X offenders back into the job market. The box that we're talking about is that little box you find nearly universally on every employment application in America, and that's the box that follows the question do you have a criminal record of some sort. Questions are asked in various ways, but the thrust is, "Are you a criminal or an ex-criminal? Yes or no?" It's that yes box that has been the subject of intense scrutiny by a variety of groups who are concerned about the fact that we have a very large percentage of Americans who do have criminal records, who do essentially have the equivalent of a big red C on their forehead for a criminal or former criminal. If they're asked immediately upon applying for a job, "Are you now or have you ever been a criminal?" the thought is that they would be deterred from applying in the first place, thus perpetuating this whole idea of a caste system where there's this underground group of unemployed and unemployable Americans leading to an unstable situation where we end up building more prisons and more jails than we do schools or hospitals, because the person can't get a job. You can't become a tax-paying law-abiding contributing American citizen.

The idea behind ban-the-box is not that any criminal can get any job they want and society is left unprotected and unprepared. It doesn't mean that pedophiles would supervise the playgrounds or bank robbers would be in charge of the cash drawer; it simply means that a criminal record will not be what's often called in the human resources world "an early knockout punch." The idea behind ban-the-box is to create an equal playing field where people are considered on their merits, not on the basis of their past history.

Now, it may well be that as employers go through their progressive screening and whittle down thousands of applicants to the five or ten, that person with a criminal record may not have the knowledge, skills, ability, education, or experience to meet the job. They're not being eliminated because of the criminal record; it's because they don't apply. The ban-the-box movement is widespread, there are some states that have extended ban-the-box to private employers. One major retailer, Target, I have to just say their name because it's a great policy, is instituting ban-the-box based on their applications. A number of states, cities, counties, municipalities, school districts and so forth have ban-the-box. Primarily it's been in the public sector. California did it this year, but some states have gone to extend it into the private sector as well, and that is one of the big trends, in fact, probably the biggest trend right now, along with the EEOC compliance guidance, that will really be impacting employers in 2014.

EEOC Guidance

FIELD: What's the impact of the EEOC guidance?

ROSEN: Anyone who is involved in hiring, anyone who has employees needs to be aware of this. The EEOC guidance that came out April 2012 really has the potential to impact the way every employer in America hires. Now, a guidance is not a law, it's not a rule, it's not a regulation; it's the way the EEOC sees things. But that does become important because as the EEOC files court cases, and they are filing court cases and conducting investigations, to the extent the standards or the idea behind the guidance becomes adopted by courts, it in effect becomes law in a backdoor sort of way. The EEOC guidance really revisited previous positions that came out in 1987 and 1990; it solidified these positions, added some meat to the bones, gave a little more explanation, but it really made it clear. The EEOC has made it clear that a big priority of the current EEOC is that there has to be fairness in the way people are employed, and a criminal record should not be used automatically to bar someone for life from getting a job. And that, although there are fair uses for criminal records, if the criminal record is job-related, this kind of kneejerk reaction that employers might have with the criminal record is a problem because it creates what is legally called disparate impact.

Disparate impact means that if a firm hires based upon the actions of a criminal record, or will not hire because of a criminal record, that the criminal record creates a disparate impact. Even though it appears neutral on its face, the effect of that in the real world statistically and mathematically is to operate as an unfair barrier towards certain people that are protected by the Civil Rights Act, and therefore the EEOC is concerned. The EEOC did a number of things. It's a very long and involved guidance, but essentially they recommended that ban-the-box is a best practice. EEOC mentioned that when an employer does ask the criminal question, which should probably be at or after the interview, that it should be narrowed down and tailored to position involved so employers are not asking about criminal records that are either too old or not relevant to the job, so that they don't really merit their consideration.

The EEOC gave employers some additional guidance on how to analyze and use criminal records, taking a look at the nature and age of the crime, nature of the job, and gave us some more in-depth information on how to do that. The EEOC has numerous other suggestions. One last thing that people should be aware of is a new tool called an individualized assessment. This is important, and employers really should implement this one right away. Individualized assessment means that if an employer decides someone is not going to get hired because of a criminal record, the employer must extend one last bite of the apple to let the applicant know that if you disagree with this criminal record or if the criminal record is correct but there's other mitigating circumstances as to why we should hire you, come on down and let's talk about it.

The good news for employers is that this new process, or the individualized assessment, does not add to the employer's burden. The employer really has to extend the hand of opportunity. So it's a good idea to take a look at the guidance. There is a group of Civil Rights attorneys and workplace rights attorneys, our firm was involved as well, that has put forward some best practices that are very easy to follow and in layman's language explains to employers simple steps you can take starting today in order to comply with this. But this is part of the reality; employers really need to rethink this idea that anyone with a criminal record need not apply because those rules no longer will work in this current environment.

Commercial Database Use

FIELD: Can you give a little bit of background about the use of commercial databases?

ROSEN: That's a key trend that plays in and is part of this whole issue of the EEOC guidance. One of the issues that the EEOC had, and one of the things they questioned, was the accuracy of background checks. As a professional background screener, it's my view that background checks, the accuracy rate is astronomically high given the amount of checks that are conducted and all the moving parts and different things that need to get looked at. But when there is an issue with the background check, not always but quite often, it has to do with a database. Employers need to be aware that there are commercial databases out there that are put together by proprietary firms that aggregate millions of records from various sources throughout the country; from prison systems and county courts to state agencies that collect records, and some of those databases in some states are pretty good. But in other states, for example New York, California, Texas, three large states that are good examples, these databases aren't very good at all. In fact, in California the rules are different than the rest of the country, these databases, for technical reasons, are pretty useless.

The problem is a couple-fold. Number one, employers can develop this kind of false sense of security thinking that because they are running a commercial database, they are somehow getting the real thing. These commercial databases are not the official FBI records. One can only get FBI records if authorized by law. You could have false negatives and false positives. A false positive means that someone is being named or identified as a criminal, where in fact they're not, either because of identity theft, or they went back to court and the database doesn't update its data. So you can have unfairness or inaccuracies in that way.

Just as bad, you can have people who really are criminals and because of the way these databases are assembled and issues with completeness, accuracy, coverage, updating, name matches, and just all the problems associated with large databases, a person with a bad criminal record that should be a criminal record the employer should consider, could be declared a person who is clear, which is just as bad. These databases in the hands of employers in a way almost become a fake cancer cure; you get this idea of this reliance which is in this place.

Now, to be fair, background firms use these databases all the time as a secondary behind-the-scenes research tool. In the hands of a professional background screener, these databases are just an additional tool. But when employers go on the internet and they see anything that says instant or database and 400 million records or whatever they might see, a big red flag should go up. In fact, the Federal Trade Commission was involved for the last couple years in looking at this. There were recently hearings in congress on data brokers and the problems associated with them, the type of data broking sites where you go online and do instant background searches just use a credit card. The other problem is a lot of these sites don't necessarily inform employers of the niceties of legal compliance, such as the federal Fair Credit Reporting Act that makes it absolutely unlawful to conduct a background check using these sites until an applicant has signed certain papers, until the employer has signed a legal certification where they provided information. This is such a heavily regulated area that these commercial sites can do nothing but get employers in legal hot water potentially by background checks that are inaccurate or background checks that are not legally compliant. You need to be very careful out there.

The trends that we see going forward are lawsuits, and there's been some big class actions recently based upon these type of commercial databases, lawsuits against employers, lawsuits against even background firms, federal government investigations on the use of these databases. So it again speaks to the idea that background checking and due diligence is not just a commodity, it's not just stick a name in the computer and put your credit card in; it's actually a professional endeavor that is quite complicated and has multiple layers of legal complications on it that employers need to be very concerned about.

Other Screening Trends

FIELD: Could you share one of your ten trends?

ROSEN: One of the things that we've been seeing over the years, and this year has really come to fruition, is the use of credit reports. Now, credit reports have always been kind of a hot-button issue. Of all the tools that employers might use for background checks, credit reports is the one tool that seems to most closely interfere with the sense of privacy, where you went to school, where you work, if you have a criminal record, those are all matters of public record. The world can see those. But a credit report is a little bit special because it might show where you shop, how much balance you have. It tends to invade the zone of privacy that we have as human beings. Add to the fact there's been a lot of misinformation on credit reports, stories about how your credit score can affect your job are absolutely false and misleading since an employment credit report absolutely does not contain your commercial credit score, that three-digit number; 672 or whatever the number might be is not on that because an employment credit report is different than the consumer credit report used to purchase something. Having said that, however, what we're now seeing is that credit reports are clearly falling into this favor as a tool for employers to use.

There's now ten states that have laws that limit the use of credit reports. Those laws are both substantive and procedural law; substantive laws in that the credit report can only be used depending upon the state but essentially the common denominator is there has to be some nexus between what the credit report will tell you and a bona fide qualification for the job. There are procedural rules in the sense that most of these laws require the applicant be told that a credit report will be utilized and the reason for it.

We also see that not only are there states that are passing laws, we also know that the EEOC has an interest in credit reports. A hearing has been held, it's widely anticipated that at some point the EEOC may come down with a guidance specifically on credit reports. Senator Elizabeth Warren just recently in the past week or two introduced legislation in the United States Senate wanting to drastically limit the ability to use credit reports for employment. So we are seeing this trend against credit reports. We do know there are certain government agencies that do require credit reports. One would think in a rational world that if a person is handling money or cash in significant amounts that a credit report could be an indicator as to whether that person is likely to be a person who might embezzle. After all, we know that embezzlement takes mode of opportunity and means. So if a credit report shows that a person is horrendously underwater in their personal finances, that may be a red flag or may not.

But at the end of the day, what we're seeing is that credit reports are becoming a very disfavored tool, and the suggestion for employers is to, number one, be aware if you're one of the ten states that has current laws about credit reports, and, number two, to be very certain that if you are using an employment credit report that you're very clear that there's a nexus between what you are looking for and the type of job that you're running the credit check for. Run a credit report only for those jobs where a person is handling large amounts of money, has access to large amounts of assets, or is making fiduciary obligations. So we're seeing that credit reports is on the way out. At the same time, interestingly enough, social media searches seem to be on the way out as well. That's searching Google and Facebook, or social networking sites; that seems to have lessened as a tool that people are using for background checks because of legal issues and accuracy issues.

How to Make Decisions Going Forward

FIELD: How should individuals and organizations use these trends to help make decisions going forward in 2014?

ROSEN: Organizations are doing background checks during, and as you approach 2014, January when there's an opportunity to reassess what you're doing and take a look at practices and procedures. It's worth taking a moment and, among your many reviews, review your background checking process with background checking programs. If your background check program was instituted some years ago when background checking was more of a commodity product and less legally regulated, you may find that you are not engaged in best practices that will keep you safe when it comes to claims that your background processes are not legally compliant or run afoul with the EEOC compliance. So at this point the best advice for employers is to sit back and analyze 'What are we doing now with background checks, why are we doing it, have we dotted our Is and crossed our Ts, do we have updated forms, and do we have updated forms for the states where we're doing background checks?" A number of states now have drawn rules, and some states have their own forms. Are we doing background checks in a way that's consistent with the EEOC guidance of 2012? Are we paying attention to accuracy? Are we paying attention to privacy rights? Are we doing sufficient background checks or, conversely, are we being too invasive?

At this point, it's not just a pure risk management exercise but it's an exercise that has a heavy layer of legal compliance issues because it affects the fundamental right and ability to be able to get employed. This would be a good opportunity for employers to take a look at these trends and reassess what they are doing in areas of background checks and ask those fundamental questions. Start the year off by making sure that you're doing the right thing the right way. That will protect you, because I can tell you that there are lawyers out there that are very well versed when it comes to the Fair Credit Reporting Act and EEOC rules and how background checks are done. There are government agencies and they are actively on the lookout for those employers who haven't taken a few minutes to put some thought and consideration into their programs who are caught literally with their pants down. And there's a class-action lawsuit that could have been avoided by taking a look at your forms and doing that internal audit and just doing a little bit of thinking. Now's the time to do it, because this is an area that is essential, it's mission critical. Every organization has to hire people that are safe and qualified and can do the job, but at the same time the process itself has to be legally correct. You have to hire the right people in the right way.

About the Author

Megan Goldschmidt

Megan Goldschmidt

Associate Editor

Goldschmidt is the former Associate Editor for ISMG. A recent graduate of Ithaca College, she has worked for multiple publications in NJ and NY, including the Trentonian and the Rochester Business Journal, instilling a passion for writing, editing and social media.

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