Employee Background Checks Headed Down a Troubling Path

Automated Screening Can Expose Your Company to Unnecessary Risk and Liability

As companies continue to embrace technological advancements in performing business activities, the move towards automating and streamlining certain processes has now targeted employee background checks. According to a recent article on the Wall Street Journal’s Venture Capital Dispatch Blog, start-up technology firm Checkr has secured funding to expand its business of providing pre-employment background screening services via an application programming interface, or API. The firm’s software directly links with a client’s existing hiring systems and allows for automating the background check process. The new company claims to return results instantaneously for some records and within two days or less for others.

In this instance, the founders of Checkr reportedly got the idea for their API while working for a start-up delivery company and found that background checks for drivers were time consuming and could benefit from a technology upgrade. Thus they sought to develop software which retrieves information from public and private sources and then automatically “…cleans the data to make it compliant with each state’s privacy regulations and eliminates items like arrests that didn’t lead to convictions.”

I do acknowledge that there are areas in the background screening industry that can use some major improvements and I applaud Checkr’s effort at attempting to streamline a seemingly cumbersome, yet necessary, business process. However, this trend of “instant background checks” is, in my professional opinion, troubling to say the least for a number of reasons. Not only is this type of screening a bad idea, it can lead to unnecessary risk and liability for your business.

Instant Does Not Equal Accurate

The time it takes to perform a proper employee background check can be a point of frustration for some employers. While I understand the need and desire to obtain relevant information as quickly as possible, background investigations should take time for the sake of thoroughness and accuracy. As important as they are to your business, hiring decisions must never rely on instant results that have not been directly verified at the source (or for that matter reviewed by someone with experience in public record research).

That isn’t just my opinion. The government diligently regulates certain aspects of background checks, especially those that are employment related. To clarify, companies that provide background reports for employment purposes are considered Consumer Reporting Agencies (CRA) under the Fair Credit Reporting Act, or FCRA. As such, among other responsibilities, a CRA is required by law to only provide consumer (or applicant) information that has met the standard of maximum possible accuracy. This means that when a criminal record is found, for example, the complete details of that case, including charges, level of severity, and final outcome, must be confirmed directly with the arresting agency and court before being reported to an employer.

An instant result from an automated service is staunchly outside these regulations and there are consequences for not following the law to the letter. Sterling Infosystems, one of the largest background screening firms in the United States, was the subject of a recent class action lawsuit that demonstrates it is nearly impossible for a CRA providing instant or automated background check results to comply with this requirement.

If you are using the services of a reputable and professional background screening firm, then you understand the time that is required to provide the most relevant and accurate information for protection from risk and liability. Even so, depending on the comprehensive nature of the background check requested, it may still be completed within a few days’ time, but with far more accurate and reliable results.

No Such Thing as a True National Criminal Database

If you plug the term “criminal background check” into your search engine of choice, you will receive hundreds of thousands of results (if not more) touting access to national criminal record information for as low as $9. Click on any of the links and you will be presented with claims that the records are accurate and thorough and “100% FCRA compliant for employment purposes.” These claims are false in that there is no true national database for criminal records that is accessible for employment purposes and whatever record you are being provided cannot, by definition, meet the maximum possible accuracy standard under the FCRA referenced above.

When companies offer a nationwide criminal check, what you will receive is a result of a name search of index records compiled from online sources and database files consisting of public records. However, the files being accessed contain inaccuracies and incomplete records or fail to include relevant information, as not all jurisdictions allow for remote access to criminal records. These companies make larger than life promises of instant results and nationwide access, but are never reliable as a stand-alone tool, despite how they are marketed.

That is not to say that all “national criminal record” databases are useless. On the contrary, national databases can be helpful as a supplemental tool in locating records in jurisdictions not previously known to be connected with an applicant or employee, but this search should never be relied upon as the primary source for background screening. To ensure a thorough search of criminal record information, statewide checks should be conducted with the proper law enforcement agency and/or state court administrator (where available) and directly with the county courts in each of the jurisdictions where the employee has lived and worked for at least the past seven years.

Also to be considered is the fact that although some jurisdictions will make criminal record information available for bulk purchase, many do not. In New York, for example, the Office of Court Administration charges between $65 and $68 dollars for a comprehensive direct statewide search and the agency does not sell its data to third parties for inclusion in databases for resale. Even in states that are included in nationwide checks nearly always have limitations either by a lack of coverage in certain cities and counties or only having historical or limited data from a specific time period. These types of databases can be tempting, especially since they aren’t exactly forthcoming with the severe limitations both in research and in legal use.

The background screening firm you use for your employee checks should provide to you in each report any limitations there may be in the research conducted and the results presented.

Non-Compliance Can Cost You

Another important factor to consider when using instant background results is that you run the risk of failing to comply with federal and state laws covering employee background checks. The Federal Trade Commission has made it clear in recent years that they will not ignore violations of the FCRA and have brought charges against several instant background check firms, including HireRight Solutions,InstantCheckmate.com, and InfoTrack, which resulted in substantial settlements. In each of these actions the background check firms were charged with providing inaccurate and unverified criminal results to employers which potentially resulted in applicants not being hired.

Employers can also be subject to litigation if they use information from a faulty or inaccurate background check to make adverse employment decisions. If you rely on an instant or automated criminal check and the service returns a record identified as a conviction when it in fact was dismissed or expunged, you could be held liable for violating the FCRA and certain state laws, depending on your jurisdiction. Wells Fargo found this out the hard way when they were named in a lawsuit for using background check results to terminate an employee for having a criminal conviction when the case was in fact dismissed with no jail time being served.

Consider the Risks and Potential Exposure to Liability

In addition to inaccuracies, employers should also be aware of the risks involved with relying on automated screening models that use software to decide whether certain records should be reported or filtered out of the results. If the application is programmed to only return records that match specific criteria, such as exact name, date of birth, and social security number, it stands to reason that the system will miss relevant, and possibly serious, offenses in the “national” index records that do not contain all of the personal indicators. A problem that is only amplified when dealing with common names in your research, such as John Smith or Bob Jones.

In this example one of two scenarios will result: 1) an excess of records with all or most not pertaining to the subject; or 2) no records at all because the name is so common. An experienced investigator will have a number of tools in their arsenal to tackle this type of problem and be able to produce far more accurate results.

It is important for business owners to understand that instant and automated background checks do not provide the level of protection needed to manage risk and reduce liability from bad hiring decisions. If a report fails to identify the violent history of a prospective employee, the employer will find it difficult to argue that it took reasonable measures by performing an instant background check for less than $10. I cannot stress enough how thorough and accurate employee background checks require time to identify all available information and to verify any potentially adverse records uncovered to reduce liability from FCRA and negligent hiring claims.

While it is important for businesses to innovate and improve the way they do business, it is also paramount not to lose sight of compliance standards and data accuracy, especially with background investigations. The right employee background check may cost more and take (marginally) longer to complete, but believe me when I say that it is the best option for protecting your firm from unnecessary risk and liability.

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Thomas Whelan

Thomas F. Whelan has been a professional investigator for over twenty years. He is a small business owner and the President of Whelan & Whelan, LLC, a private investigation firm specializing in background checks, due diligence, social media investigations, and business intelligence services. Tom can be reached via email at tom@whelanandwhelan.com.