Protecting People and Profits with Background Checks

By Carroll Lachnit

Aug. 7, 2002

For some employers, background checking has been a step taken grudgingly. They order only the bare minimum of information, mainly to protect themselves against claims of negligent hiring. But the terrorist attacks of September 11 changed many things in the world of work.

Now, a very thorough background check has become the order of the day, says Eric Boden, president and CEO of HireRight, in Irvine, California. “Employers are looking at this a little bit differently now,” he says. “Before, it was perfunctory, without much thought to quality. Now a number of our customers are asking what they can do to improve the quality of the processes on their end, and what other services we have to give them more comfort.”

Background checking can’t give employers everything they want (“There’s no known database for terrorists,” Boden says). But there are databases and sources for many, many other kinds of information: nurse’s aide registries, sex-offender registries, and workers’ compensation histories, for example. And, of course, there are the usual — and critical — background checks, done to screen for criminal, employment, and educational history.

Creating a safe, profitable workplace
One expert recommends that HR think about background checking this way: it’s not the last thing you do after selecting a candidate. It should be your first consideration, and the centerpiece of how you organize your hiring, says Les Rosen, an attorney and president of Employment Screening Resources, in Novato, California.

“Safe hiring takes place well before the background report,” he says. “It starts before the first ad goes out.” Rosen calls this a PTA process: you need a program for safe-hiring, training in it, and the auditing of it. Auditing ensures that everyone is following the program, he says.

He recommends that companies put their safe-hiring commitment front and center. Announce that you do background checking. Put it on your Web site. Put it in your classified ads, he says.

The firms that do this have a lower rate of “hits” — that is, background screenings that come back with something negative in them. Rosen says that’s because the announcement of screening prompts some applicants to opt out so they won’t be scrutinized. Boden says such applicants turn instead to companies that they know don’t do background checking. That’s “adverse selection,” and you don’t want your company to be in that group, he says.

The second advantage of letting people know that a company does background screens is that “you encourage applicants to be open about their past indiscretions,” Rosen says. It opens up some frank and important discussions that let employers make better
hiring decisions. It might not matter to you that the applicant had a DUI conviction 15 years ago, but at least your candidate has leveled with you about it.

What background checks cost
A comprehensive check, including criminal, employment, education, plus a few other specific checks, typically ranges in price from $100 to $200, says John Long, president and CEO of HireCheck, in St. Petersburg, Florida. A basic criminal check could be as little as $25. “It’s a small price to pay for peace of mind,” Boden says.

If your company is very small, and even $150 sounds like a lot, visit Employment Screening Resources’ Web site and read How to Avoid Hiring a Criminal for under $20.

The cost of not checking
Perhaps, despite the events of September 11, your company still feels that background checking is unnecessary. Perhaps you’re in a small community, and your referrals come from current employees, so you feel that you know who you’re hiring. That attitude is not going to help your company if it’s sued for negligent hiring.

“The EEOC says you can’t automatically disqualify someone because of a past criminal record. You can take it into consideration, but you have to have a sound business reason” for not hiring someone with a conviction.

“Because of increasing incidents of workplace violence, more and more governing bodies and courts in the United States have created laws or made rulings regarding employers’ responsibility to make sure they know who they are hiring before they put clients and employees at risk,” Long says. “By conducting a reasonable background check, employers should have the information needed to make better hiring decisions. By not conducting a check, the employer may be subject to lawsuits and crippling penalties and court awards if an unchecked employee commits a crime against a client or fellow employee.”

The average jury award for negligent hiring against a company was $870,390 in 2000, according to Barry J. Nadell, president of InfoLink Screening Services, in Chatsworth, California. Contrast that with the $25 your company would spend on a basic criminal-background check.

What to check
The major background-checking vendors offer a variety of reports that address the needs of employers in different industries, Long says. Although specific industries have some specialized search reports, the most common background reports include:

  • county criminal (felony only, felony and misdemeanor, misdemeanor only)

  • prior employment verification

  • education verification

  • licensing verification

  • motor vehicle record

  • credit

  • Social Security number

  • reference checks

Employers that are concerned only about avoiding liability will do a minimal search that would be considered “a reasonable” effort by the court system — protecting the employer if a negligent-hiring suit arises, Long says. Since “reasonable” has not been defined by law, an employer conducting a minimal search is probably protected from negligent hiring claims, Long says.

Typically, this minimal search would include a criminal search in the applicant’s county of residence, along with the counties where he worked and went to school, background-checking firms say. Employers also can choose a statewide criminal-background check in the state of the employer, but not all states have reliable criminal-record repositories. That means the most reliable criminal checks are done county by county (and there are more than 3,000 jurisdictions in the United States, with more than 10,000 courthouses). There is a national criminal-record database, but it’s for law-enforcement use and isn’t open to background checkers and employers (with the exception of checks for outstanding arrest warrants).

“Credit reports should be pulled periodically for employees handling company assets to monitor their personal financial condition.”

To decide which checks apply to which applicants, employers should look at the jobs people do, and match the checks to those classifications. “The reports ordered are dependent on the position, though all positions should be subject to a criminal-record check,” Long says. “For instance, there is usually no need to conduct a credit check or an education verification on a forklift operator position who has no contact with corporate assets and possibly limited educational requirements.”

Employers also have flexibility in the extent of the search by choosing how far back they want to research, Long says. For criminal-record checks, employers can obtain arrest information back seven years and conviction information back as far as the source can provide. (Note that some states, like California, generally do not permit employers to even ask applicants about arrest backgrounds, let alone consider arrests in the hiring decision. Make sure your background-checking company understands your state’s law.)

For applicants who would earn more than $75,000 in annual salary, an employer is allowed to obtain all information as far back as the source can provide, Long says.

Typically, a diligent background check would encompass a minimum of five years on non-criminal searches and the maximum allowable time for criminal records, Long says.

Here’s the critical thing to remember about these criminal checks, Rosen says: “The EEOC says you can’t automatically disqualify someone because of a past criminal record. You can take it into consideration, but you have to have a sound business reason” for not hiring someone with a conviction.

Although most background checks are conducted pre-employment, there are instances when periodic checks are in order, Long says. Driving records should be checked periodically for all employees on the road on company time. “Credit reports should be pulled periodically for employees handling company assets to monitor their personal financial condition: sudden improvements may indicate a newfound source of income — perhaps your company coffers,” Long says.

What to look for in a background-checking company
The perfect fit between a background checking vendor and an employer depends on the employer’s objectives, according to HireCheck. There are vendors that will provide a low cost, “down and dirty” search to provide some protection from negligent hiring liability at a low cost. Other vendors provide more extensive and accurate services focused on assisting employers concerned with safety and security or on making the most informed hiring decision.

Regardless of the whether the employer wants the minimum or something more, it should make sure that the vendor complies with all federal and state laws governing employment background checks. The background-checking company should be able to demonstrate its knowledge of the FCRA, equal employment opportunity law, and other federal and state regulations that address employment background checks. It should also be able to demonstrate compliance procedures in place in its company, according to HireCheck.

One quick measure of compliance with the FCRA is whether or not the company requires you to have an applicant-signed release authorizing the background check before conducting the search. This is an FCRA mandate (along with several other requirements) and no check conducted by a vendor should be completed without having first obtained this authorization, HireCheck says.

Additionally, employers should ask the vendor about the legality of its data sources. You certainly don’t want to be the recipient of illegally obtained information.

Of course, make sure you have an attorney familiar with the FCRA review your service agreement, making sure that it specifically describes the services provided, liability, and compliance roles of the parties involved.

HireCheck cites other common selection factors:

  • Can the company provide all the data that you need to make a hiring decision based on your goals?

  • Can it provide the information in a timely manner?

  • Is the data collected the most accurate available (primary sources)?

  • Does it have a national or regional scope?

  • Does it have sufficient staff to handle the volume they service?

  • Does it offer convenient methods of ordering (Web, software, fax, phone, e-mail, etc.)

  • Can it provide regulatory guidance (especially the FCRA)?

What HR should do as a partner with a background-checking company
Here are a few hints for doing your part of the job right:

  • Understand the basics of the federal laws that govern background checks. The primary one is the Fair Credit Reporting Act.

  • Make sure you get two forms of ID. You should already be doing this to complete the INS’s I-9 form. Someone might be able to create a fake driver’s license, but perhaps not several pieces of ID. Without a real identity to check, the background-screening company can’t do its job properly.

  • Require applicants to fill out a job application. “Without one, you have no way to collect the information you need,” Rosen says. “You can’t gather information such as, ‘Why did you leave your last job?’ or ‘Do you have a criminal record?’ “

  • Compare the application to the résumé. “Usually people who aren’t truthful forget their stories and make a mistake” that makes the two documents inconsistent, Boden says.

  • Finally, when the background report comes back, read it. “It may seem very basic, but we have cases where the report isn’t read,” Boden says.

Workforce, February 2002, pp. 50-54Subscribe Now!


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