Passing the screen test

If you’re applying for a job at present, there’s an excellent chance that your education, criminal record and maybe even your credit history will all be subject to scrutiny from your potential employer. Background screening has become increasingly popular amongst US businesses over the past decade; in fact, the Society for Human Resource Management (SHRM) suggests that some 80 percent of businesses now seek background checks on potential employees. This proliferation in screening has been met with concern from some quarters, sensitive to issues regarding privacy rights. But there is no escaping that with growing financial and legal pressure on firms to ensure they employ appropriate and effective staff, background screening is seen as an effective means to an end.

Certainly with employee turnover rates at an alarming high, the prospect of being able to employ the right candidate first time is particularly appealing. Estimates suggest that it can cost some US$7000 to replace a salaried employee, rising to US$40,000 to replace a senior executive. In a sector such as the retail industry, where the national annual staff turnover ranges from 60 to a staggering 200 percent of the payroll, this can lead to companies hemorrhaging cash.

“Poor selection decisions can lead to individuals not being prepared for the challenging and busy roles that they will undertake,” emphasizes Claire Logan Principle Consultant for Business Transformation at PA Consulting. “More effective screening could alter this.” Indeed, according to the US Small Business Administration, for every dollar an employer invests in employment screening, the return on investment ranges from US$5-16, resulting from improved productivity, reduced absenteeism, lower turnover – and decreased employer liability.

It is this last factor that has perhaps been most instrumental in the rise and rise of background screening in the past two decades. Companies can suffer significantly from bad hiring decisions, stemming from events such as financial fraud – average annual losses stemming from insider computer breaches in Fortune 1000 companies, for instance, are estimated to be around US$450,000. But employer liability for negligent hiring can be just as damaging, and far more common.

Employers can be sued if other employees or members of the public are harmed through workplace violence, bad driving, sexual harassment or any number of other acts for which the employer might be held responsible. Workplace violence, for instance, costs employers US$36 billion annually, with the average out-of-court settlement around US$500,000. This doesn’t, however, take into consideration the damage that is also done to a company’s reputation in such an incident.

“The number of checks performed by [our company] has grown over the past few years because employers are increasingly realizing the importance of truly knowing its workforce,” says Dean Suposs, General Manager of ADP Screening and Selection Services. “In today’s business environment, with corporate scandal and mounting regulation, organizations have to implement a screening policy to reduce liabilities – including criminal charges, reputation damage and financial loss. Liability used to be mainly a concern for large enterprises; however, there are more rules and regulations today than ever before despite the size of the business.”

Background screening

The detail covered in a background check very much depends on the nature of the job. Those applying for jobs in care homes, for instance, would have very different checks from those working in office jobs. Similarly, someone applying to work for the FBI would be subject to far greater background check requirements than a minimum wage job. Criminal history is one of the most common things employers check, with the Society for Human Resources Management reporting in 2003 that as many as four out of five employers check for a criminal history.

Another common check is a thorough examination of the applicant’s resume – and in particular, job experience and qualifications. The SHRM estimates that 53 percent of all job applications contain false information. And in view of the alarming rise in fake diplomas and other such qualifications available over the internet, this area has become critical.

“Verifying past employment and education is a big issue because there are a lot of folks that fraudulently say that they were with a certain employer for a long time or that they have a certain skill level,” suggests Robert Capwell, President and CEO of Comprehensive Information Services (CIS) and Co-Chair of the Board of Directors for the National Association of Professional Background Screeners (NAPBS). “There are so many resources out there when it comes to lying about education – diploma mills, for example. We did a study on these mills and a staff member paid US$519 for a diploma, deciding what type of degree they wanted, what kind of GPA they wanted, and the package included a window decal, a thank you letter and even that the person was involved in the student council. It was crazy.”

Similarly common are checks on social security numbers, with a fraudulent number a warning flag for possible identity theft, insufficient citizenship or concealment of a past life. Driving and vehicle records will inevitably be checked, particularly by employers in the transportation sector, whilst drug tests are becoming increasingly common for a number of reasons including measuring potential employee performance and keeping workers’ compensation premiums down. Many jobs today require not only drug testing, but also some form of psychological or personality testing as well.

“Traditional checks are made through references and interviews, but the kinds of skills that organizations are trying to measure – for example, creativity and customer service – are actually incredibly hard to measure using those processes,” says James Bywater, Head Psychologist at SHL. “The key thing is that you are going to get a better match of people to the roles and this can provide quite tangible benefits such as improved sales and customer service, and lower attrition of staff.

“There are a few fields to background screening: employers have always checked references and then there is the second level where employers go beyond that and check things like credit references; the third level is a full-scale investigation by employers into what people have said on their CV; and then there is also the psychometric side. But they are all trying to answer the same fundamental question about who is good and who is not so good.”

Subjective evaluations

Nevertheless, while employers continue to embrace background screening, others remain disturbed about the implications of its proliferation. Tena Friery, Research Director at consumer rights advocacy group the Privacy Rights Clearinghouse (PRC) highlights one such concern: “Credit history is often checked and there is no requirement in the law that this type of check be limited to jobs with financial responsibilities. Employers may use credit history to make subjective evaluations about personal responsibility.”

There is legislation in place in a bid to ensure a national standard for fairness and privacy in employment screening in the form of the Federal Fair Credit Reporting Act. The FCRA covers not just credit reports but a host of consumer reports, including employment reports. It requires that a subject be given notice and give consent to a background check. Under the FCRA, some information, such as medical information, requires specific consent and must be related to the job. Furthermore, if the employer decides not to hire an applicant, or to fire a current employee-based on something in a background check, this event triggers certain other procedures. The employer must then give the subject a notice of rights and information about how to get a copy of the screening report. However, these rules apply only when the employer hires a third party screening company.

And there are other worries. “An applicant or employee should have absolute right to a copy of his/her report,” highlights Friery. “But employers can avoid the procedure by simply saying another candidate was better qualified. An applicant does have the right to dispute erroneous information reported in a background check. But this can take up to 30 days to be resolved and usually the damage is already done. An employer is not obligated to reinstate a job offer, even if information is later found to be erroneous.”

Aware of such concerns, the background screening industry has worked at creating a more ethical reputation. In 2003, the National Association of Professional Background Screeners was founded to offer ethics and training for screening companies. Providing different types of education around compliance and consumer privacy, the NAPBS provides a code of conduct that members adhere to.

“I’ve been in this industry for about 17 years now, and when I first entered the sector there was probably only about 30 companies that did background screening,” says the NAPBS’ Capwell. “After the effects of 9/11 and concerns about terrorism, however, a lot of people decided to get into this industry, with not a lot of knowledge about all these federal and state laws, processes and procedures. So we decided to come together as an association to teach these things before the government comes in and starts regulating our industry.”

Accreditation program

The NAPBS is also presently working on an accreditation program providing accreditation designed to ensure companies follow a Federal Trade Commission-mandated process, using credible sources, and ethical means and best practices. Whilst this is yet to be implemented, Friery still recommends that any company – large or small – looking to undertake background screening, ensure it employs a professional screening company.

“These companies know the legal requirements and can guide an employer through the process, supply appropriate notice and consent forms, and offer advice if the screening results in an adverse employment decision,” she suggests. “Using a reputable screening company can benefit both the employer and the employee. Employees are more likely to receive the rights (although minimum, in my view) they do have under the law. At the same time employers may have some assurance that a disqualifying factor has not been overlooked. Even checks by professionals are not foolproof, of course, but this is far superior to the employer attempting to use, for example, one of the many internet look-up services. The sites offer little assurance that information is accurate or updated to show current status.”

In the meantime, irrespective of concerns over employee rights, the popularity of background screening will inevitably continue to grow as companies look to cut costs from employee turnover, boost productivity from efficient staff and minimize employer liability. Provided that screening is professionally executed, companies can certainly enjoy a myriad of business benefits. And although privacy issues linger in this field, positives can certainly be taken from the fact that firms are dedicating unprecedented levels of attention and resources to the employment process.

“The consistent rise in the number of background checks performed year after year is evidence of the diligence employers are taking in the recruitment and hiring process,” concludes Suposs. "Employers consistently face hiring risks including applicant dishonesty, workplace violence, negligent hiring liability, turnover, theft and fraud. As evidenced by the increased use of pre-employment screening, employers are realizing the value in performing background checks as a way to help ensure a qualified, experienced workforce."

“In today’s business environment with corporate scandal and mounting regulation, organizations have to implement a screening policy to reduce liabilities” – Dean Suposs, General Manager of ADP Screening and Selection Services.

“Employers may use credit history to make subjective evaluations about personal responsibility” – Tena Friery, Research Director, Privacy Rights Clearinghouse

“After 9/11 and concerns about terrorism a lot of people got into this industry, with not a lot of knowledge about all the federal and state laws, processes and procedures” – Robert Capwell, Co-Chair of the Board of Directors for the National Association of Professional Background Screeners