Special Report: A Check on Background Checks

Before Edward Snowden was hired by the National Security Agency, his character was subjected to a deep background screening; the subsequent findings of that investigation indicated a clean history.

However, earlier this year Snowden leaked sensitive NSA surveillance secrets, sparking a national controversy despite his clean background check, which has since come into question.                               

But a clean background check was all the agency could get from the organizations that looked into the past of the now-infamous Snowden because, according to industry experts, there’s no such thing as a guarantee in the background checking industry.

“There shouldn’t be a guarantee because these things are not an absolute. Background screening is just one means of mitigating risk,” said Greg Dubecky, president of Corporate Screening Services, a background checking services provider in Cleveland.

The Snowden controversy serves as an example of how background screenings are just one process employers can use to ensure they’re hiring the right person. Such checks should function as a supplement to a thorough interview process, said Bill Tate, president of background screening company HR Plus in Chicago.

“Background screening and drug testing are only a couple tools you can use to make sure you have the right person. The interview process is still very, very critical: to ask the right questions and to listen and to ask additional questions. A background screen will never be a substitute for that,” Tate said.

While the accuracy of the information obtained from a background check is important, how an employer uses that information in the hiring process is crucial to avoiding discrimination lawsuits and potentially paying big fines.

Compliance Trends
Background checks have increased over the past 12 months, according to responses by screening companies surveyed for this month’s Hot List. (See next page.) All but one participant in last year’s Workforce Hot List reported increases in 2013 in either the number of individuals screened or corporate clients using employment-related screening services. Nine out of 15 Hot List participants reported increases in both categories.

It’s an industry that carries significance for most human resources departments: 69 percent of all employers conduct background checks on their job applicants, according to the Society for Human Resource Management’s 2012 background checking survey.  

Greg Dillard, a partner specializing in employment law at Vinson & Elkins in Houston, said he believes the growth of the Internet and the increasing ease of obtaining information has led to a jump in background screens. “Along with that, there’s been a growth in the number of accredited consumer reporting agencies. And I think that companies are feeling while there’s still a possibility of getting misinformation, they’re more comfortable with the reliability of some of the information,” he said.

The increases in background checks were preceded by new guidance from the U.S. Equal Employment Opportunity Commission in April 2012 (See: tinyurl.com/EEOCguidance).

Sources indicated the biggest trend in the background screening industry over the past 12 months has been trying to comply with the new EEOC guidelines, even though they were released more than a year ago.

The new guidelines have posed a challenge to employers “because it requires employers to identify essential job functions and the actual circumstances for which the job will be performed. You combine that with trying to determine specific criminal offenses that will make you unfit for the job, and it is a challenge for most employers to comply with,” Dillard said.

In July, nine attorneys general sent a letter to the EEOC expressing their concerns regarding the agency’s recent guidelines and its discrimination lawsuits against discount retail chain Dollar General Corp. and automaker BMW Manufacturing Co. stemming from the organizations’ use of background checks during the hiring process. According to the attorneys generals’ letter, the EEOC’s pursuit of these lawsuits is a “misguided and a quintessential example of gross federal overreach.”

But while it may be interpreted as a burden by employers, the EEOC believes its guidance is necessary to control the negative effect background checks could have on minority groups protected under Title VII of the Civil Rights Act of 1964.

Background checks “could have disparate impact or disparate effect on protected classes under EEOC,” Dubecky said.

Disparate impact occurs when an employer imposes a neutral rule that in and of itself does not show discriminatory intent, but “in its application it affects one protected group much more than another,” said Justine Lisser, a spokeswoman and senior attorney at the EEOC.

According to the EEOC, arrest and incarceration rates are particularly high for black and Latino males. Black and Latino people are arrested at a rate that is two to three times their proportion of the general population. If current incarceration rates do not change, about 1 in 17 white men are expected to serve time in prison during their lifetime; whereas, this rate climbs to 1 in 6 for Hispanic men; and to 1 in 3 for black men.

As a result, a hiring process that includes background checks has the potential to disparately affect black and Latino people.

The so-called “ban the box” movement is one recent trend to limit the disparate effect on minority job applicants by removing the section of an application where job candidates indicate if they have been convicted of a crime by a court of law.

As of July, 51 cities and counties have removed the box concerning criminal history, and 10 states have made it illegal for public and private employers to include it on job applications, according to the National Employment Law Project.

By removing that box, an employer must evaluate a job candidate as an individual and on his or her merits. A background check is still legal in those locations whose governments have eliminated that section on applications, but if a conviction is discovered, the employer must consider the nature of the crime and if it applies to the open position, the time passed since the conviction and the individual’s behavior during that time. It also must be determined if the conviction conflicts with business necessity.

For example, if somebody with a recent fraud conviction applies for a job working with personal identifiable information like Social Security numbers, that employer can decide to hire a different candidate because the prior conviction is job-related.

“If you’re hiring somebody with unfettered access to personal identifiable information like Social Security numbers or credit card numbers, there it might be consistent with business necessity and job related,” Lisser said. Background checking policies need “to be narrowly tailored, and you have to look at the individual in front of you instead of making blanket rules.”

Employers will have the best chance at avoiding discrimination lawsuits and defending against them if they have a written background checking policy that diligently follows the guidance provided by the EEOC, as well as the laws regulating the process under the Fair Credit Reporting Act.

It’s not unusual for a company to have no written policy, Corporate Screening Services’ Dubecky said. “You’d be amazed at how many say, ‘Well, we don’t have one!’ These are Fortune organizations in some cases. That’s pretty alarming,” he said.

Other Trends
“Ban the box” is a part of a larger trend occurring in the background screening industry that has the process moving to the later stages of hiring. Some companies have started including the background check in the onboarding process, Dubecky said.

 “So organizations now, we’re starting to see, are building background screening into the onboarding process as opposed to what’s commonly done these days in recruitment,” Dubecky said. In this process, an employer makes a contingent offer to a job candidate and then conducts a background screen of the tentatively hired employee.

K.C. Lewis, director of human resources for HR Plus, said another trend she’s started to see is conducting background checks on an existing workforce every two to three years. Lewis said the practice allows employers to keep their employees safe in the workplace.

“Sometimes in HR, we find out about divorce situations and then you get into financial trouble and people will come to us in HR for an employee assistance program. But you know, one thing could lead to another. One of my responsibilities is to keep my employees safe when you get into those situations where there could be domestic violence, and I don’t want an ex coming into the office potentially looking for someone,” Lewis said.  

Assessing the Burden
It’s interesting to note the increases in background checks during the past year despite the increased compliance measures implemented by the EEOC in 2012.

Is the legislation and guidance regulating the industry not as burdensome as some employers and the nine attorneys general claim it is? Or is the increase in background checks, as Dillard suggests, because of the greater ability to obtain information through improvements in technology. Perhaps the answer lies somewhere in the middle, leaning toward the improved ease of conducting background checks in light of technological advances.

Regardless of the feeling that there has been too much burden placed on employers that conduct background checks, those burdens are here to stay for the foreseeable future.  

“Employers really need to be cognizant of the fact that the EEOC’s not going to rest even in light of those nine state’s attorney generals that wrote that letter. This guidance is here to stay. It’s for altruistic purposes, and they need to make sure that they comply,” Dubecky said.