Background checks are an excellent form of due diligence that can protect employers from potentially catastrophic hiring mistakes. However, multiple laws apply to employer use of background checks, and careless implementation can create a lawsuit-fueled backlash against your company, as it has against companies like Uber, Amazon, UPS, Lowe’s, and many others. In fact, litigation based on just the Fair Credit Report Act (FCRA – one of the regulations that governs background checks) has increased nearly 50% from 2016.
Here’s what you need to know to prevent background checks from backfiring on you.
Employers frequently fall out of compliance with the FCRA when performing background checks.
The FCRA regulates the use of consumer information, including consumer reports and background checks conducted by a third-party (e.g., your background check provider). Class action lawsuits based on FCRA non-compliance can lead to multi-million dollar settlements. To comply with the FCRA, employers must:
1. Certify that they’re using the background check for a permissible purpose,
2. Disclose their intent to run a background check and obtain applicant authorization,
3. Take certain steps if they take adverse action (e.g., not hiring the candidate) based on information contained in the Consumer Report.
Background checks can also violate equal employment opportunity laws.
Employers are prohibited from systematically treating one group of employees differently from another group, particularly if one or another group is part of one of the protected classes (gender, race, age, etc.) established by Title VII of the Civil Rights Act of 1964 or other federal or state law. Disparate treatment can trigger action by the Equal Employment Opportunity Commission (EEOC) and make employers vulnerable to litigation. If your organization performs background checks only or primarily on older job applicants, for example, you’re breaking the law. Note that this is true of informal background checks (i.e., Googling job candidates) too.
Background checks can turn up false positives.
Background checks are not necessarily foolproof. Say your job candidate was arrested and charged for some crime, but those charges are later dropped or dismissed. According to the Bureau of Justice Statistics, an estimated one-third of arrests with felony charges do not result in conviction. Unfortunately, states are not consistent in how they report this information to the FBI, so the charge might be reported but the final disposition of the case might not be. Hence, the background check would report incomplete or incorrect information.
Additionally, sharing a name or other identifying information with another person can turn up background information that does not pertain to the applicant at all. Error rates in background databases can run sky high; for example, “one screening company studied federal corrections databases and found a ‘41% error rate,’” according to Fast Company. The only real solution is to verify every claim of criminal activity, e.g., obtaining the criminal record from the courthouse and double-checking that it’s the right person. That’s where the right background check partner can help.
For more information on this thorny issue, along with clear best practices for putting background checks to best use, watch our webinar, “Avoid Background Check Backlash.”