With announcements of company layoffs continuing, there will be more job seekers in the market for new positions. This presents opportunity for those companies in the position to hire, but that opportunity also comes with risk.
Hiring a new employee can be daunting. While no one asked could agree on an exact number, it is estimated that 20 to 50 percent of all job applications contain false information. And according to the U.S. Department of Justice, one in 32 adults has a criminal record – 45 percent of whom lie about it on job applications.
Washington state statutes require specific types of background checks for employees who have unsupervised contact with children younger than 16 and with developmentally disabled and vulnerable adults.
But even in other fields, background checks – if performed correctly – can allow companies to be confident about their new hire and can reduce the risk of a negligent hiring lawsuit.
Employers lose more than 70 percent of these cases and awards can exceed $1 million.
But many employers are unaware of how to do background checks correctly, said Janet Minton, director of operations at Vancouver-based Employers Reference Source Northwest Inc.
Doubtful data
Paying an Internet service to perform background checks is perceived as quick and inexpensive, costing $20 to $80. But the typical online background check is useless in proving due diligence in a negligent hiring case, because Internet databases are woefully incomplete, Minton said.
“There is not any one single source of information,” she said. “These online databases are only 20 percent to 60 percent correct.”
Nine states don’t sell their criminal data to online databases. And in states that do, many counties opt out.
Many online databases don’t include federal crimes, such as mail fraud and firearms and hate crimes. Misdemeanors also do not typically turn up in an Internet search.
It is also common for a background check to combine data for two “John Smiths” who were born on the same day,” Milton said. Internet searches do not include “identifiers,” such as photos and physical descriptions that can help untangle such mix-ups.
The national sex offenders registry is the only truly national database, Minton said, and even by the FBI’s admission, its fingerprint database contains only about 85 percent of the FBI’s data.
And, online databases are not kept up to date. Minton said the Fair Credit Reporting Act requires that companies use the most up-to-date information when making a negative hiring decision.
Getting the big picture
What are companies to do?
Firms can conduct physical county- and state-level checks – where an applicant has lived, worked or gone to school. Minton recommended running a Social Security number trace to find all applicant addresses of record – not just the ones listed on the job application.
Companies also can hire a third-party consumer reporting agency. Employers Reference Source Northwest charges a flat fee of $49 for a complete background check.
But companies should be aware that using a third-party consumer reporting agency subjects the company to FCRA rules, said Richard Matson, shareholder at the Vancouver law office of Bullivant Houser Bailey PC. Completing a background check in-house does not subject the company to the FCRA, he said.
Limiting exposure
Ensuring a background check is complete is only half the picture, Minton said.
There are both a federal and Washington state FCRA rules, Matson said, and they have specific regulations regarding disclosure, consent and other details.
For example, applicants must sign a release that notifies them a background check will be performed and exactly what will be checked. This release must also contain a summary of their rights – including the right to see what turns up in the check, he said.
“Companies open themselves to discrimination claims if the type of background check is not closely related to the job class,” Matson said.
And, he pointed out, there is a lot of room for interpretation about what “closely related” means.
But while it satisfies legal requirements, notifying applicants about background checks is also a first level of screening.
If, after learning you’re going to do a background check, an applicant is no longer interested, “That tells you quite a bit,” said Doug Williams, president of Doug Williams & Assoc.
Finally, companies should handle background check records carefully – do not, for example, route them through the office for everyone to read, Matson said.
If a negligent hiring suit does surface, a company must show it has formal, written policies that indicate that background checks are performed, what the company will and will not accept and how these criteria are related to the type of business.
Pulling credit reports is particularly fraught with danger, Minton said.
According to a recent Washington state law, employers can make hiring decisions based on a credit report only if that information is directly related to the job – such as controllers and accountants.
“We don’t recommend pulling a credit report on any applicants except those who will have direct access to company funds,” Minton said.
BACKGROUND CHECK CHECKLIST
- Notify all applicants that you will perform a background check
- Tailor the scope of the background check to the specifics of the job sought
- Identify gaps in the applicant’s job or education history
- Check all references
- Verify all employment and education claims
- Document everything – who you contacted, their responses, etc.
- Develop company policies covering background check issues
- Follow your background check policies consistently, even if you’re in a hurry to fill a position
CHECKING ON THE CHECKERS
Before you hire a firm to perform background checks, some screening is in order. Janet Minton, director of operations at Employers Reference Source Northwest, Inc., suggests asking the following questions:
What sort of searches do the company offer?
Does it search only national databases, or does it also search at the federal, state and county levels?
Does it use a Social Security number trace to get an accurate address history to guide the search?
What is its pricing structure? Examples include a flat fee, a per-name search fee and a per-county or per-state search fee.
How does it handle applicant disputes?
Is it familiar with relevant laws and regulations, such as the Fair Credit Reporting Act and state laws?
Does it store and protect personal information in a responsible manner?
Does it follow federal regulations in case of lost information or a data breech?
How long has the company been in business and has it been involved in any litigation?
Does it offer ready access to reports, such as a 24/7 online system?
