The Employment Screening Survival Kit

An Essenal Resource for Employers

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NAPBS MEMBER | CONCERNED CRA

A Lowers Risk Group Company

Introducon
In todays business environment, where lean workforces are pressed to deliver more than ever, it is crical to have the right people in place. One misstep by an unqualied, unt, or dangerous employee can bring detrimental or catastrophic results to your brand, your people, and your prots. On the other hand, look at success stories of the leading brands across many industries and youll nd one common thread: They commit to hiring the right people. As you put pracces in place to get the right people on board, youll likely nd yourself walking the ne line between managing risks and protecng the privacy and employment rights of your candidates and employees. Stay within the lines and youll gain valuable insight to drive your hiring decisions. Cross this line and you can nd yourself faced with unwanted trouble.

Get the right people on the bus, the wrong people o the bus, and the right people in the right seats.
JIM COLLINS, G O O D T O G R E AT

What is Pre-Employment Background Screening?

Its the process of gathering informaon about a prospecve new hire to objecvely evaluate a candidates

qualicaons

character

tness

and to idenfy potenal hiring risks for safety and security reasons. It is also commonly used to verify the accuracy of an applicants claims. SOURCE WIKIPEDIA
On the surface, employment screening seems like a simple task. Sign up, run the background check, check the box! What you soon discover are the nuances, legal issues, and other consideraons that can turn a seemingly simple acvity into one that can quickly feel complex and even overwhelming. It doesnt have to feel this way. Make no mistake; your background screening program will be put to the test in a number of dierent ways:

Does it promote fair hiring pracces? Is the program integrated with exisng onboarding processes? Is it easy to implement? Does the program deliver accurate and insighul data? To survive, your program Is it compliant with federal, state, and local laws? must be able to pass Does it support your corporate risk management goals? these tests and more. Does it deliver a measurable ROI?

Despite the challenges, employment screening is not an oponal exercise.

E l Employers h have a d duty t of f care t to hi hire and d retain t i people l who h are t and d qualied li d for f their th i respecve roles. l There Th are simply i l too t many cases where a companys failure to adequately screen its employees has resulted in expensive claims of negligence and damage to people, brands, and prots that could have been minimized or avoided with the right screening approach.

Negligent Hiring: A Denion

Negligent l h hiring may be b found f d where h the h employee l had h d a reputaon or record d that h showed h d his h propensity to misuse the kind of authority given by the employer, and this record would, or could have been easily discoverable by the employer, had the employer exercised 'due diligence.
SOURCE WIKIPEDIA

It doesnt have to be dicult.

W Were going i to t show h you h how t to survive i th the challenges h ll and d extract the greatest value from your employment screening program so your organizaon can benet from a process that is proven to deliver a safer and more producve workforce that generates fewer losses and greater prots.

For every dollar an employer invests in pre-employment screening services, the return on investment ranges from $5-16, resulng from improved producvity, reduced absenteeism, lower turnover and decreased employer liability.
U S S M A L L B U S I N E S S A D M I N I S T R AT I O N

Whats in this Kit?

This Employment Screening Survival Kit is designed to give you valuable insight and tools to help you reap the rewards of a solid employment screening program. Youll discover:

How to plan and budget your background screening program, including how screening ts
into the recruitment process, how to assess your risks, how to map roles to screening acvies, how to select a screening services provider, and much more.

What you need to know when execung your employment screening program,
including important consideraons for FCRA and EEOC compliance, adverse acon nocaons, social media, and more.

How to measure your success, including a useful worksheet to help you calculate the ROI of your program. Before you read further, we want you to remember one important point as you make your way through this survival kit:

This is not a DIY project.

R Rarely l does d it make k sense f for an organizaon i to t run its it employment l t screening i program in-house. i h Instead, I t d most t companies i nd it essenal to hire a professional background screening company to administer the background checks. The best screening companies will even provide necessary compliance support and consulng along the way to ensure your program is up to par. This Employment Screening Survival Kit, therefore, contains important informaon for you, the HR administrator or employer -not you, the background screener. There is a dierence and we think youll appreciate that this Kit will address the issues you need to consider and things you need to know as you outsource your employment screening services. We hope youll nd signicant value in this Kit. Your feedback is welcome. Please visit us online at www.proformascreening.com.

Lets Dig In!

Part 1: Planning & Budgeng Your Screening Program

Building an employment screening program that can survive the tests of applicants, candidates, employees, regulators, corporate leaders, and other stakeholders begins with having a solid plan and budget in place. Your background screening provider should help you formulate your plan but there are several things you need to consider on your end as you go through the process:

How background screening ts into your recruitment process. Integrang screening into your recruing and onboarding processes. Training the people who will implement the program within your organizaon.

Background screening as a risk management project. Your budget. All background screening companies are NOT created equal.

Part 1 of the Survival Kit will explore each of the above consideraons in turn.

The Lay of the Land

How Background Screening Fits in the Recruitment Process
There are no shortcuts.
A common misconcepon among job applicants and employers alike is the noon that an employment background check is or should be performed on any applicant at any me. In reality, screening each and every applicant would be a serious waste of valuable resources, unnecessary, and possibly even illegal. Instead, background checks are most commonly performed on candidates a company already considers to be desirable and theyre generally performed just before an oer is made or as a conngency of a job oer.

To debunk another misconcepon, employers and their background screening providers dont perform background checks without rst obtaining consent from the applicant.
So background screening is most oen used as a later-stage check to verify what we think we know and certainly what we hope is true about a prospecve employee. The background check serves as an objecve check-and-balance in the recruitment process and prevents gut feel from prevailing over facts. If your companys use of employment screening diers from what weve described above, you may have a problem. (Talk to us.)

In broad terms, the recruitment process consists of the following steps:

1. 2. 3.

Posng jobs and sourcing candidates Receiving applicaons Interviewing candidates

4. 5. 6.

Performing background checks on nalists Presenng job oers Onboarding new hires

You know you need to check the backgrounds and verify the credenals of likely candidates before a nal non-conngent oer is made. At the same me, you know that when you have a candidate ready to hire, the last thing you want is to have the progress impeded or halted by the screening process. Thats why, when planning your screening program, youll want to make sure your background screening provider can integrate their services, quickly and smoothly, right from your applicant tracking system or directly through their own web-based ordering system.

Speaking of which

Seng Up Camp
Background Screening and the Onboarding Process
Can your onboarding process survive the scruny and expectaons of today's 'connected' workforce? With the right approach, you can seamlessly integrate your employment screening process with your onboarding procedures to give your new hires a great rst impression while giving yourself and your company essenal risk protecon and peace of mind. Onboarding is where the rubber meets the road in the recruitment and hiring process. Youve got a great new person on the line, commied to joining your company. You like them, they like you, and now youve got some due diligence and paperwork to complete. A disorganized process at this stage can make your ideal candidate reconsider and take that next best oer. A smooth, well-designed process can solidify this new relaonship and get the right employees working for you straight away. So, whats the dierence between an impressive onboarding process and a one that will make your candidates pack up and leave? Heres an overview:

Impressive!
Automated assignment and tracking of employee onboarding tasks Web-based employee access to necessary paperwork Automated checks to ensure all paperwork is complete Storage and retrieval of employee onboarding documentaon Ability for employees to complete paperwork prior to scheduled start date

Get me oua here!

Mulple phone calls, emails, and missteps creang a chaoc and me consuming process Print, mail, sign, fax, lost paperwork, print again, mail again, sign again, fax again There is one last form we need you to sign Mr. Candidate. Phone calls, le searches, copying, mailing First day(s) of work are spent lling out paperwork

Now What?
Training the People Who Will Implement the Background Screening Program
Okay, great. Youve decided to start background screening, or maybe youve been doing employment screening all along, but now youre turning over the reins to a new manager. Is it as easy as telling your new HR or recruing manager to order background checks on those people? Or is there more they need to know? We think its the laer. Heres why:

There are just too many compliance issues surrounding employment screening to let someone learn by doing. The costs of doing it wrong can be too great. Your recruiters and HR administrators (anyone ordering a background check) need to understand where screening ts in the process, whats required before a check can be conducted, and how to handle the resulng report.
Whats more, have you ever felt that pit in your stomach when you nd out that the candidate you love has a dangerous criminal background? Or that theyve lied about that degree or credenal? Its not fun. And your people need to know how to deal with it.

Thus, we say train them well.

Now theres no need to get all stressed out about this. Were not suggesng your managers need to be experts in background checks. There is an enre industry of people out there whose job it is to know every in and out of background screening protocols, regulaons, and procedures. We are suggesng, however, that your training covers some essenal topics theyll need to know as they work with a background screening services provider and interface with candidates and employees during the screening process.

Background screening 101 - the FCRA and obligaons of employers How background screening ts into YOUR COMPANYS process Risk- and role-related screening methodology Applicaon of rejecon criterion FCRA 102 - the rights of the applicant and dispute resoluon process

Managers and recruiters trained in the basics of employment screening can save a you lot of headaches and trouble down the road. Consider it a small investment in risk migaon. If you need help developing or implemenng a training program for your HR managers or recruiters, ask your background screening company to help. If they dont oer training they should be able to point you in the direcon of someone who does.

So far in this Planning secon of our Employment Screening Kit, weve covered how screening ts into the recruitment process, the right way to onboard your new employees, and the need for training. Now were going to move into some nuts and bolts of risk assessment and choosing the right screening provider. In these next two secons, youll nd some valuable worksheets to help you assess your risks and evaluate background screening companies for your programs.

Onward!

Surviving the What Ifs

The Risk Management Side of Employment Screening
Companies who truly get that employment screening is part of a holisc risk management strategy and treat it as such are the companies that reap the greatest rewards. Were going to show you how to think like a professional risk manager and assess the risks youll be addressing in your employment screening program. Once you understand and ulize this process, your eyes will be opened to the role and value of screening and youll progress toward building a truly valuable program for your organizaon.

Measure Your Employment Screening Risks, and Manage Them Well

Lets start with a few basics:

What is risk?
Risk is the danger that injury, damage, or loss may occur. Enough said.

Human capital risk: The people side of risk.

Human capital risks are those risks that stem from the people side of your business. (Considering most risks start and end with people, this is signicant.)

Risk appete and risk tolerance: Whats yours?

According to a recent Risk and Insurance Management Society, Inc. Execuve Report on Exploring Risk Appete and Tolerance: Understanding and managing risk appete and risk tolerance is a key aribute of an eecve enterprise risk management program. Every organizaon has an acceptable and comfortable level of discomfort, so to speak, with the real and perceived risks that face their businesses. Since it is nearly impossible and unrealisc in most cases to migate every risk, organizaons must make a risk-return trade-o that takes into account the organizaons risk appete -- the exposed amount of risk an organizaon is willing to assume -- and risk tolerance -- the amount of uncertainty the organizaon is willing to accept.

Employment Screening as a Risk Management Strategy:

Lets bring the conversaon back to employment screening. Employment screening oers an objecve approach to help you manage the risks associated with hiring and retaining the people in your organizaon. Rather than relying on gut feel or whats printed on an applicants resume, employment screening gives you clear methods by which to verify stated facts and check the background of a prospecve or current employee. Plus, a screening program can strengthen your defense in the event of a negligent hiring or negligent retenon lawsuit by demonstrang your duty of care in the employment process. Many believe the best predictor of future behavior is the past. And while people certainly can and do change their ways, insight into a persons background and past performances when combined with your assessment of their current and future potenal, can greatly enhance the quality of your employment-related decisions. When you make beer hiring decisions, you can beer migate the human capital and hiring-related risks that impact your organizaon. So its a win-win.

Begin with a Risk Assessment:

Like most business acvies, risk management begins with an assessment of where you are today. What level of risk do the various posions in your organizaon present? Assessing your employment-related risk requires you to look at a number of factors, including: The level of supervision associated with the posion The access to people and/or property associated with the posion The brand damage that could result from a catastrophic event involving the employee The overarching role of human capital in your organizaon

Plan Your Screening Program Accordingly:

From the risk assessment, and with an eye on your organizaons risk tolerance, you can begin to plan how youll migate those risks through your employment screening program.

A controller who will have access to companys bank account and nancial informaon.

Criminal and civil records check, reference checks, employment history vericaon will verify a persons qualicaons and trustworthiness in this role. Criminal, DMV records, federal criminal records, drug screening, and reference checks can uncover history or behaviors that can impact a persons suitability for this role. A comprehensive background check that includes naonal, local, and federal criminal records, sex oender records, credit report, educaon vericaon, employment vericaon, and media and civil records searches.

A pharmaceucal courier who will have unsupervised access to drugs and will drive a company vehicle on the job.

A CEO who is in a posion of leadership and trust; a bad hire can be catastrophic to the companys brand and prots.

Set Your Hiring Criteria:

Running a background check is one thing. Knowing what to do with the results is another. Create a consistent and equitable process by pairing relevant risk with appropriate rejecon criteria across each role within your organizaon. Create clear markers for your rejecon criteria and apply those markers consistently across all applicants. Also, be sure your decisions meet applicable laws and guidelines (more on that later).

Screening Methodology

On the next page youll nd our risk assessment worksheet. Use it to assess your risks.

Risk Assessment Worksheet

Step 1:
Assess Your Organizaons Risk Tolerance
The following statements will help you assess your tolerance for risk and establish the lens through which youll evaluate the results of employment background checks. Indicate your level of agreement with each risk statement. STRONGLY DISAGREE We have zero tolerance for crime. It is unacceptable for someone with a criminal record to work here under ANY circumstance. An individual(s) in our company has been a vicm of a crime. Our employees and customers have high expectaons concerning the safety of our workplace. We have zero tolerance for drugs in the workplace. In the past, our organizaon has experienced signicant losses, incidents, and/or exposures. Our customers are engaged in a risk intensive business. The nature of our work is risk intensive. STRONGLY AGREE

0 0 0 0 0 0 0 0

1 1 1 1 1 1 1 1

2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3

4 4 4 4 4 4 4 4

5 5 5 5 5 5 5 5

TOTAL SCORE

Step 2:

Assess Your Role-Related Risks

POSITION A: Answer the following quesons related to the roles associated with this posion. Legal or contractual obligaon related to background screening?...................................................................................... Access to people and/or property....................................................................... Primarily Supervised Access to or control over nancial records or nances of the company?......................................................................... Ethical or legal relaonship of condence or trust regarding the management of money or property?............ Posion of authority over another person or within an organizaon?............................................................................. Posion of authority over a group of people and/or will represent the company as a key employee?.............. Organizaon has an established drug and alcohol abuse prevenon program?........................................................... Operate a motor vehicle?...................................................................................................................................................................... Professional license required?............................................................................................................................................................ Prerequisite level of educaon required?...................................................................................................................................... Minimum work experience or skills required?............................................................................................................................. yes yes yes yes yes yes yes yes yes yes no no no no no no no no no no

Primarily Unsupervised

Step 2:

(Cont.)

Risk Assessment Worksheet

POSITION B: Answer the following quesons related to the roles associated with this posion. Legal or contractual obligaon related to background screening?...................................................................................... Access to people and/or property....................................................................... Primarily Supervised Access to or control over nancial records or nances of the company?......................................................................... Ethical or legal relaonship of condence or trust regarding the management of money or property?............ Posion of authority over another person or within an organizaon?............................................................................. Posion of authority over a group of people and/or will represent the company as a key employee?.............. Organizaon has an established drug and alcohol abuse prevenon program?........................................................... Operate a motor vehicle?...................................................................................................................................................................... Professional license required?............................................................................................................................................................ Prerequisite level of educaon required?...................................................................................................................................... Minimum work experience or skills required?............................................................................................................................. POSITION C: Answer the following quesons related to the roles associated with this posion. Legal or contractual obligaon related to background screening?...................................................................................... Access to people and/or property....................................................................... Primarily Supervised Access to or control over nancial records or nances of the company?......................................................................... Ethical or legal relaonship of condence or trust regarding the management of money or property?............ Posion of authority over another person or within an organizaon?............................................................................. Posion of authority over a group of people and/or will represent the company as a key employee?.............. Organizaon has an established drug and alcohol abuse prevenon program?........................................................... Operate a motor vehicle?...................................................................................................................................................................... Professional license required?............................................................................................................................................................ Prerequisite level of educaon required?...................................................................................................................................... Minimum work experience or skills required?............................................................................................................................. POSITION D: Answer the following quesons related to the roles associated with this posion. Legal or contractual obligaon related to background screening?...................................................................................... Access to people and/or property....................................................................... Primarily Supervised Access to or control over nancial records or nances of the company?......................................................................... Ethical or legal relaonship of condence or trust regarding the management of money or property?............ Posion of authority over another person or within an organizaon?............................................................................. Posion of authority over a group of people and/or will represent the company as a key employee?.............. Organizaon has an established drug and alcohol abuse prevenon program?........................................................... Operate a motor vehicle?...................................................................................................................................................................... Professional license required?............................................................................................................................................................ Prerequisite level of educaon required?...................................................................................................................................... Minimum work experience or skills required?............................................................................................................................. yes yes yes yes yes yes yes yes yes yes no no no no no no no no no no yes yes yes yes yes yes yes yes yes yes no no no no no no no no no no yes yes yes yes yes yes yes yes yes yes no no no no no no no no no no

Primarily Unsupervised

Primarily Unsupervised

Primarily Unsupervised

Step 3:

Formulate Your Screening Methodology

Risk Assessment Worksheet

With a beer understanding of your organizaons risk tolerance and the role-related risks for each posion in your organizaon, its me to formulate your background screening methodology (the actual 'checks' you'll perform for each role).

Screening Methodology Risk Tolerance

Forms the lens through which youll view your background screening results.

Role-Related Risk
Determines the level of screening required for each posion.

Select the actual background checks and vericaons you'll require for each role.

Basic Intermediate In-Depth

Selecng the Right Background Screening Services

Use our interacve background screening program planner to conduct a risk assessment on each role and view resulng screening recommendaons. Youll instantly nd out what screening services we recommend based on key risk-related criteria.

Try It Now
proformascreening.com/program-builder

Youre Smart, Not Paranoid

As you consider your employment screening program, certain thoughts or feelings may enter your mind, such as:

No risk, no reward. Nothing bad has happened yet; why should I worry about all of this now? People can die walking across the street. Why are these people making such a big deal about risks? Im willing to take the risks. Who needs background screening when youve got great insnct?
Each of these thoughts has a certain degree of merit but an even larger degree of, well, alarming risk. We say, be condent in your program! The existence of an employment screening program shows that you care about building a safe and producve workforce. And it builds a sense of safety and trust among the members of your workforce and your customer base. Furthermore, relying on background checks doesnt mean youre paranoid or that you or your hiring managers lack insnct or trust; it means youre smart and know what it takes to protect your people, brands, and prots.

Your Budget
Seng Your Background Screening Budget
The price of an employment background check is in part determined by the number and types of screening services you need for a given role. As demonstrated in the risk assessment exercise above, a construcon worker might require a less stringent background check than a store cashier. A delivery driver may require more screening than a telephone sales rep. And as you would expect, the higher the risk, the more extensive the background check, and the greater the cost. On average, a basic background check that includes SSN Validaon, SSN Locator, Naonal Criminal Records with Local Court Follow-Up, Terrorist Watch List, and Sex Oender Registry searches retails under $30 before volume or other discounts are applied.

Criminal Records

Employment Vericaon

Driving Records

Drug Screening

Other Screening Services

The price of a background check is determined in part by the number and extent of the screening services you require for the posion.

Wholl Guide Your Way?

Selecng the Right Background Screening Provider
Weve already menoned that employment screening is not a do-it-yourself project. It rarely makes sense for companies to handle background checks using internal sta. A quality screening provider knows how to navigate the court system to pull the most accurate, and up to date records. They know whats reportable and whats not. Plus, the right screening provider can guide you through your compliance obligaons, and give you the tools you need to run an ecient and secure web-based process that gets the right people onboard quickly. So, now the queson is what provider should you choose? Clearly as the creators of this Survival Kit we have experse in this eld and would love for you to work with us. But our real goal here is simply to communicate that not all background screening companies are created equal. Weve put together two tools here that youre free to use to hire and evaluate potenal employment screening companies:

Sample RFP for Background Screening Services

(Click Here to download the NAPBS sample document.)

Evaluang the Responses: How to Choose the Right Screening Provider

(Visit the next page to view or Click Here to download the PDF.)

Background Screening Company Selecon Matrix

Part 2: Executing Your Background Screening Program

In Part 1 of this Survival Kit we talked about planning and budgeting your screening program. Now its time to execute! There are several things to understand as you manage the process:

Cultural, economic, and demographic trends impacting employment practices The Triple Threat of regulation, legislation, and litigation The basics of compliance

2 common employment screening pitfalls Best practices of employment screening How to measure the ROI of your program

Part 2 of the Survival Kit will explore each of the above considerations in turn.

Forces at Work
Trends Affecting Your Employment Screening Practices
Looking at the United States as a whole, a few key trends have been building for a couple of decades, at least. As youll see, these trends now influence your employment screening program execution.

Trend #1: Globalization & Transition to Service Economy

On the macroeconomic level, globalization of the workforce and a transition away from manufacturing toward a service-based economy mean companies must increasingly compete on the basis of peoples skill, talent, and knowledge.

Impact: As companies compete in a talent-based economy it is more important than ever to hire and retain the right
people. Background screening has become more important as companies strive to make well-informed hiring decisions.

Trend #2: The Great Recession & Long Term Unemployed

On the microeconomic level, the great recession of 08/09 still impacts the economy today with sustained high unemployment and relatedly, a long-term unemployment situation. The U.S. has experienced an 8%+ unemployment rate for the past three years, with some cities seeing 10% for the past 3-4 years. 42% of unemployed workers have been out of work for more than 6 months; one-third have been out of work for more than a year. (Source: US DOL BLS)

Impact: With more people out of work, there is significant pressure on employers to avoid any practice that limits employment opportunities for those currently seeking work. Thus, employment screening practices that serve to weed out candidates are subject to scrutiny.

Trend #3: Rising Arrest, Conviction, and Incarceration Rates

According to the National Employment Law Project, more than one in four U.S. adults has an arrest or conviction record that would show up in a routine criminal background check. In 1991, 1.8% of the U.S. population had served time in prison. In 2007 that number jumped to 3.2%. According to these statistics, 1 in every 31 people has served time in prison (not just jail, prison). Of those born in 2001, it is estimated that 6.6% of them will serve some prison time in their lifetimes. Thats a startling figure. Whats more, its important to note the dramatic imbalance with respect to the rate of which certain minority groups have been arrested and convicted. According to the Department of Justice, African Americans account for 28.3 percent of all arrests in the United States, yet they represent just 12.9 percent of the population (that rate is more than double their share of the population!). The following chart shows the likelihood of going to prison during a lifetime for black, Hispanic, and white males.

Likelihood of going to prison in lifetime:

28% black males 16% Hispanic males 4% white males

SOURCE US DOJ BJS

Impact: Criminal records are being viewed as a barrier to employment that requires greater enforcement of civil rights and consumer protections for those with criminal records. The EEOC issued new and updated 2012 guidance related to employers use of criminal records. Employers must take precautions to avoid intentional and unintentional discrimination.

Trend #4: Ubiquitous Use of Employment Screening

Nearly a 35 year-old two billion dollar industry, background screening has been embraced by more than 90% of U.S. corporations as a hiring tool (up from just 66% in 1996).

Impact: Widespread use of background screening, along with industry growth and consolidation has made employment
screening a target for legislators, regulators, and the Plaintiffs bar alike.

Beware the Triple Threat

Employment Practices Are Under Scrutiny
The trends discussed above and the resulting concerns over discrimination and consumer protection have put employment practices under intense scrutiny in recent years. There are three key issues that combine to form a triple threat to your employment screening practices. Its important to know what the threats are so you can work with your background screening company and employment attorney to address them.

REGULATION: Legal compliance enforcement activity by the EEOC and FTC.

The Equal Employment Opportunity Commission (EEOC) enforces Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on race, color, religion, sex, or national origin. As part of its enforcement duties, the EEOC has put a number of initiatives in place, including programs to eliminate race and color discrimination, systemic discrimination, and disparate impact. The Federal Trade Commission (FTC) enforces the Fair Credit Reporting Act (FCRA), and has taken well-publicized recent action against employers and Consumer Reporting Agencies whose FCRA compliance obligations are not being met. The FTC has also addressed employers use of social media screening.

LEGISLATION: Legislative changes to an employers legal use of credit report, criminal record, and social media background checks.
State and federal lawmakers have taken legislative action to limit the use of credit reports, criminal records, and social media as employment screening practices. Ban the box is probably the most noteworthy of these legislative changes, as six states have adopted and at least four others are considering legislation to prevent certain employers from asking general or specific questions about an applicants criminal history. Congress has introduced the Equal Employment for All Act, which would edit the FCRA to limit the use of credit reports in employment.

LITIGATION: Private litigation and class action lawsuits being brought against employers relating to their background screening practices.
Title VII discrimination has been an active topic in private litigation. Several high profile cases have been brought against employers based on the use of credit reports and criminal records in hiring. There have also been cases against employers for alleged FCRA violations, including disclosures and authorizations. Negligent hiring and negligent retention practices have also been targeted. To learn more about the Triple Threat, we invite you to watch our recent two-part series, Regulation, Legislation, Litigation: The Employment Screening Triple Threat. This on-demand webinar is available on our website at www.proformascreening.com/lp/ triple-threat-webinar-series.

Get in Survival Mode

Surviving the Employment Screening Triple Threat:

The Basics of Compliance
In thinking about how your organization can survive the triple threat and execute a program that is both compliant and effective, we believe its important to have at least a base level understanding of the biggest compliance issues youll face.

This next section features brief summaries of:

Negligent hiring and negligent retention Basic FCRA requirements Social media screening implications Employment credit reports 2012 EEOC Guidance on use of criminal records

Negligent Hiring and Negligent Retention

Individuals, groups, or organizations failing to uphold a legal duty of care while performing an act that could foreseeably cause damage to others, when this failure results in injury, may find themselves accused of negligence. In an employment setting, negligent hiring and negligent retention are among the many potential sources of negligence claims.

Negligent hiring is exactly as it sounds: an employer places an individual in an employment situation that creates an
unreasonable risk of harm to others. Claims of negligent hiring have been made against employers for a wide variety of crimes and injuries, including murder, sexual assault, injury, and property loss. For an employer to be found guilty of negligent hiring, courts may consider: The offending employees previous track record (is the individual known to have previously misused his or her employment-related authority?). Whether the employer could have easily discovered the offending employees previous record. Whether the employee exercised appropriate due diligence in the hiring process.

Negligent retention involves retaining an employee whose potentially damaging behavior was known or should have
been known by the employer. First recognized by the Florida Supreme Court in 1954, the tort of negligent retention considers it the employers responsibility to: Become aware of problems with employees that may indicate they are unfit for the job at hand. Take action, such as investigating, discharging, or reassigning the employee in order to reduce the employees risk of harm to others.

3 Basic FCRA Obligations

When an employer hires a Consumer Reporting Agency (CRA) to perform background checks or verifications on a prospective or current employee, that employer has certain obligations under the Act. Employer obligations under FCRA can be summarized as follows:

3 FCRA Basics
Compliance Certification Applicant Disclosures & Consent Adverse Action 2-Step

1. Provide FCRA and EEO Compliance Certification to the CRA

Employers must certify to its CRA/background screening provider that it will comply with FCRA and EEO laws. This straightforward certification is usually included as part of a CRAs service agreement.

Do the two-step!
(Better yet, let your background screening company do it for you.)

2. Applicant Disclosure and Authorization Requirements

Employers must comply with pre-background check disclosures and authorization. Before ordering a background check the employer must provide a disclosure document that has specific language about the background check and obtain the signature/authorization of the applicant. It must be a standalone document or screen (in the case of an HRIS system).

Pre-Adverse Action Notice

3. 2-Step Adverse Action Requirements

According to the broad definitions of the Fair Credit Reporting Act, a denial of employment constitutes an adverse action. Any decision that is adverse to the interests of the current or prospective employee would

Adverse Action Notice

similarly fit the definition. Employers must provide notification to the applicant before and after the adverse action, allowing time after the pre-adverse action for the individual to respond to the findings or explain any inaccuracies. This can be a very lowimpact activity if you outsource to your CRA, yet it can be a very costly mistake to fail to comply fully.

Social Media Background Screening Implications

Almost a year ago the FTC completed an investigation of a provider of social media screening services. The Commission opined two things:

1. FCRA does apply to social media screening.

That means all FCRA requirements apply. That means youre still responsible for certification, disclosures, and adverse action 2-step requirements. Importantly, dispute reinvestigations on the part of the CRA are also in play with respect to social media, which creates real challenges for employers.

2. Section 607 of the FCRA also applies to social media screening.

This means the information presented in the background check must be the most accurate information possible. This obviously presents additional challenges for both the CRA and the employer since verifying the accuracy of whats found in social media is fraught with complications. Legislation in this area has tended to focus on the non-public areas of these social networks, as in the case of employers asking applicants for Facebook passwords, etc. Meanwhile, some of the latest legislation being considered is directed to both the public and private access of information.

Use of Credit Reports

EEOC guidance and current legislation around the use of employment credit reports centers on the idea of presumed disparate impact. In other words, the EEOC says that the use of credit reports automatically disproportionately affects members of a minority group. Because of this, if a claim is issued against an employer for the use of credit reports in hiring, the duty is on the employer to prove that there isnt. Several states have already passed and many others have proposed legislation around credit reports. At the federal level, the US Congress is looking at a bill called the Equal Employment for All Act. This would prohibit an employers use of credit reports, with exceptions for national security, FDIC clearance, state or local government agency requirement, supervisory, managerial, or professional position at financial institution, or if its otherwise required by law.

Use of Employment Criminal Records

The biggest news around employment screening in recent months has been the EEOC 2012 Updated Guidance on the use of criminal records in employment screening. The guidance specifically relates to Title VII of the Civil Rights Act of 1964, which is enforced by the EEOC, and is an update to the longstanding previous guidance issued more than twenty years ago. According to the EEOC, the current updates are needed to reflect todays increased access to criminal record information, case law analyzing Title VII requirements for criminal records exclusions, and other developments.

In assessing potential liability for employment discrimination, the EEOC looks through two lenses: 1. Disparate treatment When an employer treats an individual or a class of individuals differently because of their race, national origin, or other protected basis intentional unlawful discrimination. 2. Disparate impact When an employers neutral policy or practice has a disproportionately negative effect on a member of a protected class or an entire protected class inadvertent unlawful discrimination. An employers use of criminal records in hiring has become an EEOC enforcement focus because, without proper practices and policies in place, an employer runs a high risk of discriminating against certain protected classes. The EEOC has repeatedly stated that national data supports a finding that criminal record exclusions have a disparate impact because of the disproportionate number of African American and Hispanic individuals with criminal backgrounds. The updated EEOC guidance document brings forward the following points concerning how the EEOC will determine disparate impact: 1. The EEOC will look at the policy or practice in question. 2. The Commission will assess whether that policy or practice deprives a disproportionate number of Title VIIprotected individuals of employment opportunities. 3. The Commission will assess the probative value of an employers applicant data. In other words, if a company has a reputation for excluding or discouraging individuals with criminal records from applying in the first place, there would be nothing in the applicant data to show discrimination since presumably few people with criminal histories would even have applied.

Is the employment practice job-related and consistent with business necessity?

This is, and has been for the last 20+ years, the big question. The longstanding test for assessing job-relatedness and business necessity (known as the Green Factors from the 1977 8th Circuit Case, Green v. Missouri Pacific Railroad, 549 F.2d 1158 (8th Cir. 1977) are: The nature and gravity of the offense or conduct; The time that has passed since the offense or conduct and/or completion of the sentence; The nature of the job held or sought. In its updated guidance, the EEOC references numerous court cases deemed relevant in assessing whether criminal record exclusion policies and practices will meet the test of job relatedness and business necessity.

Weve boiled it down to the following:

Appropriate use of arrest vs. conviction records. Employers need to understand the difference because its a
big one. Simply put, arrest records are not proof of criminal conduct as they may not report the actual outcome of the situation so, in most situations, they should not be used as grounds for exclusion. Conviction records, on the other hand, typically serve as sufficient evidence that a person engaged in a particular conduct. These records are more reliable and the use of them by an employer is more defensible.

Established link to role-related risk. Employers must be able to demonstrate an effective link between the specific
criminal conduct and the risks inherent in the duties of a particular position.

In this case, the EEOC points out that employers can consistently meet the job relatedness/business necessity defense by validating the positions criminal screening per the Uniform Guidelines on Employee Selection Procedures (Uniform Guidelines) standards, OR and this is important -- developing a targeted screen considering at least the nature of the crime, the time elapsed, and the nature of the job (the three Green factors), and then providing an opportunity for an individualized assessment for people excluded by the screen to determine whether the policy as applied to the individual is job related and consistent with business necessity. Individualized assessment is the big new idea.

The Ban the Box Movement

Related to the EEOCs guidance and regulation around the use of criminal records are statelevel movements to Ban the Box, in which proponents seek to eliminate the question or group of questions about criminal conduct on job applications. Many applications will include general have you ever been convicted... questions and others will have more specific questions about the timeframe or types of offenses. CA, CT, MN, and NM have already passed their own legislation related to state employment. HI and MA banned the box for both state and private employers. Proposed are MD, NE, NJ, and RI.

Look Out Below!

2 Big Employment Screening Pitfalls:

Pitfalls are plentiful in the world of background screening, but most of them are foreseeable and avoidable. Two of the most common pitfalls we seen employers fall into time and time again are worth mentioning here.

Pitfall #1: Using Only National Criminal Records Database Searches

Background screening is not as much difficult as it requires professional attention to details that are easily overlooked if the business model of your vendor is cheaper, faster. This often applies in the case of so called national criminal records searches. Some employment background screening firms sell national criminal records databases to employers without appropriate safeguards to ensure that the information they are delivering is accurate and up to date. Criminal records databases are valuable sources of information but they also contain serious limitations that must be mitigated responsibly. Records pulled from database are not comprehensive, nor are they always accurate or up-to-date. So even though they do have value in the screening process, they should never be sold as the end-all-be-all to criminal screening. A cheap check is not going to tell you if that record belongs to your applicant theyll simply send records that match the name of your applicant. If your subject name is Michael A Smith, youre going to get a thousand records. What are you going to do with them? And if an issue does appear on a particular criminal record, the cursory database check wont include verification against local records. And this leaves you open to potentially serious problems. Choose a provider who is both willing and capable of taking that extra step with what they get back from a particular records search and what they ultimately deliver to you. Plain and simple, conducting a criminal database search without a local records

follow up is unethical at best, at worst perhaps negligent. Handing over reports without a system for handling discrepancies and ensuring accuracy is equally appalling. You can expect both of these ill-advised practices from a cheap provider.

Pitfall #2: Offshoring of Personal Identifying Information

As brought to light by the organization ConcernedCRAs, some employment background screening firms send the sensitive personal information (i.e. social security numbers and financial account information) off-shore to be processed. Sending such information off-shore places both applicants and employers at risk and should be avoided whenever possible. Alternatively, when personal information is sent to other countries, applicants and employers should be made aware of this practice. In California, SB-909 was recently passed to provide that a Consumer Reporting Agency is liable to a consumer who is harmed by any unauthorized access of the consumers personally identifiable information, act, or omission that occurs outside the United States or its territories. In turn, it can easily be argue that any company that knowingly hires a consumer reporting agency that off-shores sensitive personal information, with or without consent, is taking unnecessary risks. And recognize that in recent years, many states (not just California) have taken measures to prevent the misuse of personally identifiable information (PII) in order to combat the increasing threat of identity theft. The federal government has also stepped in with federal protections contained in the Gramm-Leach-Bliley Act (GLBA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Furthermore, the federal Fair Credit Reporting Act (FCRA) was amended in 2003 to provide additional identity theft protection. So even if youre not obligated by SB 909 you still need to be thinking about this. Once your applicant or employee data leaves the shores of the United States, our nations privacy protection laws no longer apply. And while data theft certainly can also occur in the U.S., we do have legal protections, resources, and recourse mechanisms to help victims of identity theft. Once the data goes off-shore, those protections quickly disappear. This is an important point that all employers should be aware of and often the issue rears its head when it comes to price shopping. Youre looking for the least expensive background checks you can find but you may be putting your applicants, your employees, and your business at risk if you unknowingly rely on cheap background checks that are off-shored for processing.

Avoid the Pitfalls

The two practices described above do not appropriately protect employment applicants and they place employers at increased risk of litigation and public relations problems.

Heres how you can protect yourself:

AVOID cheap, instant criminal records. While criminal records databases are useful in identifying potential criminal records they should not be relied upon as accurate or complete. If your screening provider sells you a database criminal records search without verifying the results at the local court level, beware. ASK your background screening provider about their offshoring practices. If you cannot be assured that the PII of your applicants is kept within the boundaries of the United States and not sent offshore for processing, you need to find yourself another partner.

Finding Your Way

Best Practices of Superstar Employers

Weve talked a lot about what NOT to do in this guide. Now lets turn our attention to best practices. How your employment screening program should be done. Here is a list of top-recommended practices:

Define the Purpose & Scope of the Employment Screening Program

Employment screening policies are typically designed to protect people and property your employees will come in contact with, including fellow employees, customers, contractors, and the general public. Your policy should explain the purpose of background screening and also define the scope of the program, or the types of positions that will be subject to background checks.

Designate Responsibility & Authority for the Process

Your employment screening policy should designate the people or person responsible for implementing and managing the program. It should define the types of employment decisions that can be made by each individual involved in administering the program. There are almost always situations that require judgment calls and its important to define who will make those decisions.

Describe Legal Parameters & Guidelines

A background screening policy must consider any federal, state, or local laws that affect how the organization will conduct screening. In many instances these laws require background checks within specific criteria for certain positions. In your policy you should specifically outline how the organization will adhere to Fair Credit Reporting Act requirements, EEOC guidelines, anti-discrimination laws, and any other related screening laws. The policy should give clear direction as to how results of any background check should be applied in a consistent and equitable manner across all applicants and employees.

Outline the Specific Process

Any good policy can get stuck in the mud without an equally well-defined process. Create and publish your background screening policy. The policy should be specific to the risk tolerance and business goals of your organization. It should detail the types of checks to be conducted at varying levels within the organization, when and how screening is to be conducted, and what information will be collected. Furthermore, a documented process should detail step by step how the policy is implemented. It should help the subject of the report understand what happens and when. It also helps hiring managers involved in the hiring process.

Consistently apply the process across all applicants and employees.

A process is only as effective as its implementation and in background screening the key to implementation is consistency. To avoid claims of discrimination, employers must never conduct background checks on a selective basis. All similarly situated applicants and employees those applying or being retained for the same or similar positions must be subject to the same format of background check.

Establish congruency between the background search and the position and risk.
Find balance between your need to know and an individuals privacy rights. By keeping the screen job-related youll naturally assess the risk of a given position in determining the type of information you need to gather.

Obtain consultation and services from an experienced screening provider.

It rarely makes sense to attempt background screening without the services of a qualified background screening firm. The logistics and complexity that surround the collection and use of background data for employment purposes require know-how that most companies simply dont have. Not only that, but a screening provider can help you create the clarity, consistency, congruency mentioned in the steps above. In the end, the cost of employment background screening services is seldom more than it would cost to run the program using your internal staff.

Comply with FCRA regulations, state and federal laws, and other contractual obligations, as applicable to your organization
The complexities of employment background screening can be dizzying when you consider the Federal Equal Employment Opportunity and Fair Credit Reporting Act meshed with state Equal Employment and Fair Credit Reporting laws, combined with Americans with Disabilities Act and other legal or contractual obligations you face. Before long you may find yourself wondering if its all worth the effort. A qualified screening provider, paired with appropriate legal counsel, can help you effectively deal with the compliance environment and get the most out of your efforts.

From the EEOC

And, straight from the EEOCs 2012 Guidance, here are best practices for the use of criminal records in background screening: Eliminate policies or practices that exclude people from employment based on any criminal record; Train managers, hiring officials, and decision-makers about Title VII and its prohibition on employment discrimination; Develop a narrowly tailored written policy and procedure for use of criminal records; Identify essential job requirements and the actual circumstances under which the jobs are performed; Determine the specific offenses that may demonstrate unfitness for performing specific jobs; Identify the criminal offenses based on all available evidence; Determine the duration of position-specific exclusions for criminal conduct based on all available evidence; Record the justification for the policy and procedures; Note and keep a record of consultations and research considered in crafting the policy and procedures; Train managers, hiring officials, and decision-makers on how to implement the policy and procedures consistent with Title VII; When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity; and Keep information about the criminal records of applicants and employees confidential (only use it for the purposes for which it was intended).

Dollars and Sense

Measuring the ROI of Background Screening

a.k.a. Making Financial Sense of Best Practices
Best Practices is a common business term used in almost every management meeting. But, are best practices actually best for your company? As corporate America has evolved, more and more emphasis has been placed on Return-On-Investment or ROI. The burden of ROI proof initially fell to the operations side of most companies, but now even hard-to-quantify business areas like Human Resources and Risk Management are asked to prove the value of their stated best practices. At Proforma Screening Solutions, we have spent a significant amount of time and research around the issue of ROI. Using a model based upon the work and formulas derived by Charles Handler, Ph.D. and Steven Hunt, Ph.D, weve created a formula to capture and quantify the various components that cost companies money by hiring the wrong employees. The formula takes into account the cost and rate of turnover, occupational fraud (skimming, larceny, billing schemes, etc.), and catastrophic events (robbery, assault, other forms of workplace violence). Taken in totality, the business losses that can be reduced by background screening - including turnover, theft/fraud, and catastrophic events (and their resultant legal losses) - add up to over $1.5 trillion annually. When this data is compared against total business revenues (GDP) and applied to an average company, we can see that 13.4% of all revenues go into our waste bank. This figure provides ample room for improvement, with the starting point being the introduction of a strategic background screening program implemented by a highly qualified provider. For a quick reference, use the handy ROI Calculation Worksheet on the next page to assess the value of your program. For more on this topic, download our free guide Calculating the ROI of Your Background Screening Program.

ROI Calculation Worksheet

ROI from Background Screening Program Parameter
Beginning Employee Count Estimated Annual Hires Before Turnover Annual Hires After Turnover Direct Losses from Catastrophic Hire % Catastrophic Hires Avoided Assessment Cost Annual Turnover Rate Average Time to Fill (Weeks) Value of Performance (Annual) Hiring Cost Selection Ratio Reduction in Turnover Value of Avoiding Catastrophic Hires Value of Reducing Turnover Total Liability Value Program Cost Net Annual Value: Net Annual ROI:

Sample Company
10,000 500 4,564 $26,710.00 5% $60.00 38.7% 5.3 $133,550.00 $4,745.00 5.0 25% $6,094,554.25 $8,104,880.98 $14,199,435.23 $1,369,050.00 $12,830,385.23 937.2%

Your Company

Formula

N DLCH HA C TR TF VP HC SR rx t N*DLCH*HA N*TR*(((TF*VP)/52)+HC)*rx t

N*C*SR

Estimated ROI from strategically designed and expertly implemented employment background screening program based upon the formulas derived Charles Handler, Ph.D. and Steven Hunt, Ph.D.

N= Hires The number of employees hired per year due to growth and turnover. DLCH= Direct Losses from Catastrophic Hire This is the average loss incurred due to hiring an employee who engages in theft, violence, lawsuits, or other counterproductive behaviors. It should include legal and security fees incurred as a result of counterproductive behavior. In this example we have very conservatively set this value at $26,710, or half of the estimated $53,420 value of salary plus benefits based upon the Employment Policy Foundations estimates. HA= Percentage of Catastrophic Hires Avoided This indicates the percentage of candidates screened out through background checks who would have engaged in employee theft, violence, or legal actions had they been hired. Industry statistics suggest that around 10% of background verifications uncover something substantially negative about candidates. If you estimate that half of these candidates would in fact engage in counterproductive behavior, this value can be set at 5% of hires.

C= Assessment Cost How much the use of assessment tools will increase the costs of evaluating candidates. The cost of background check packages ranges from $10 - $200 depending upon position and responsibilities. TR= Annual Turnover Rate The percentage of the workforce that currently leave each year due to turnover. Bureau of Labor Statistics estimates this at 38.7%. TF= Average Time to Fill The average number of weeks required to fill a vacant position. A 2006 Society of Human Resource Professionals (SHRM) average time to fill metric of 37 days for all same-industry hires. VP= Value of Performance This is an estimate of the annual revenue generated by the employee. This is commonly set at 2.5x employee salary (plus benefits) according to SHRM guidelines. HC= Hiring Cost The average internal business costs associated with hiring an employee. These costs include time spent by recruiters and managers sourcing and screening candidates, time and costs spent training new hires, as well as any other onboarding costs such as relocation or orientation. SHRM studies place average hiring costs at $2,546 for hourly employees and $6,943 for salaried employees. SR= Selection Ratio This is the number of candidates you typically assess before making a hiring decision. It is typically somewhere between 3 and 10. Rx t= Reduction in Turnover The decrease in turnover that will result from the use of a strategically designed and implemented background screening program implemented by a quality provider. When designed properly, these tools can reduce turnover by 50% or more. Nissan North America was able to reduce its annual turnover rate from 91% to 10% over the course of 4 years by utilizing better screening and assessment strategies.

About Proforma Screening Solutions:

Employment screening informs hiring decisions and reduces human capital risk. We offer the unique advantage of industryleading experience and supply chain ownership to deliver quality, cost-effective results. Access a complete array of services, from criminal records checks to employment verifications, delivered through an intuitive and secure online portal.

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