Imagine a company hires a courier. The courier, while driving a company vehicle, causes a major accident.
It turns out the courier is drunk and has two prior driving under the influence issues. Imagine the potential liability of the company.
A client, a third-generation family business employing some 50 people, discovers its controller is stealing and nearly goes out of business.
Far-fetched? Sadly, no.
Research shows disturbing data. Employee Screening Services, a background check vendor, reports that 2.9 percent of those investigated had driving violations, 8.7 percent had criminal records, 5.8 percent had credit issues and 2.8 percent had identity issues.
Employee theft cost U.S. employers more than $50 billion annually and accounts for one-third of business bankruptcies, according to Static Brain research. The U.S. Chamber of Commerce reports similar data.
Consequently, in recent years, employers have increasingly turned to pre-employment background checks. The items most commonly checked are criminal history, driving record, identity verification (usually Social Security number, address and phone), credit history and education/license verification.
Beyond what the data suggest, there are additional reasons for the increase in background checks.
Pennsylvania, like most states, recognizes the concept of negligent hiring. Employers must exercise due diligence when hiring employees and can be held accountable if they do not.
Historically, employers have checked references to satisfy due diligence. However, today it is difficult to obtain meaningful references. Employers are afraid of being sued for giving a bad reference. As a result, most large employers will only verify employment and have instructed their managers to refer reference requests to the human resource department.
KNOW THE RULES
An employer who decides to do pre-employment background checks needs to be mindful of the legal environment surrounding them.
First, traditional background checks are governed by the federal Fair Credit Reporting Act. Applicants must sign a release form authorizing the check. Equal Employment Opportunity Commission guidelines on discrimination apply. Conducting background checks inconsistently could result in claims of discrimination.
Employers contemplating or using background checks must recognize that all major human resource laws and regulations, including the FCRA and EEOC guidelines, were enacted before the emergence of social media.
In other words, use of social media, such as LinkedIn, in vetting applicants is undefined. When in dispute, matters are being resolved in court on a case-by-case basis.
IS IT FAIR?
Background checks are not without controversy. Critics argue these checks are an invasion of privacy, often contain erroneous information and are not used properly (e.g., is it relevant to check credit on a receptionist applicant?).
To be sure, credit reports, and sometimes criminal reports, contain errors. Credit reports can be hard to read and interpret.
Also, criminal reports usually will show arrests when federal and state laws require the employer to consider only convictions.
TELL THEM UP FRONT
Employers should disclose early in the process that background checks are done before hire. This is a courtesy to candidates and may cause some candidates to withdraw, knowing what theirs will show.
This also will encourage candidates to share information which may help explain their history.
For example, a job loss or divorce could flag an otherwise good credit history. A youthful indiscretion will linger a long time on one’s record.
It is sometimes helpful to discuss the report with the candidate, as it might help to explain the concern or correct wrong information.
Dick Cipoletti is president of RCC Associates of Salisbury Township, a regional human resources firm providing HR consulting, staffing and training services to clients. A vice president of human resources in three industries and a published author, he teaches in the Master of Business Administration program at DeSales University. He can be reached at firstname.lastname@example.org.