EmployeeScreenIQ Blog

Oh don’t mind me.  I’m just playing word association with the following phrase “EEOC Meeting to Discuss Use of Criminal Records”.  Feel free to send in your own suggestion for my word cloud above.

Why the sarcasm?  Where to start?  We asked earlier this week if the EEOC was willing to have an honest and open dialogue on employers’ use of criminal background checks. We got our answer pretty quickly.  If the list of those who would testify wasn’t answer enough, check out the press release which the EEOC distributed just hours after the 4 hour meeting was concluded.  The key word here is “distributed” since it was clearly “written” well before the meeting.

Instead of listening to both sides of the issue, the EEOC paraded out a cadre of individuals damning the use of criminal records in the hiring process.  No one was there to talk about the liability employers face.  No one was asked to talk about the victims of violent criminal activity in the workplace.  No one was called on to talk about the mounting losses employers shoulder due to internal theft.  Oddly, no one was there to discuss the nation’s largest consumer of employment background checks, the U.S. government whom the last time I checked, the EEOC was a part of.

They favored testimony from the Department of Justice who offered the Blumstein study on the point of redemption as ironclad and unimpeachable rather than as a limited study, based on limited criminal activity, based on a limited geographical area.  They listened to testimony that the FBI’s database only includes about 50% of all criminal records.  Never mind that those in our industry use far more accurate methods to conduct criminal background checks.  They heard testimony that talked about employers running roughshod over applicants’ rights and ignored that fact the the FCRA and state laws provide protection.

According to those in attendance, here’s where it stands.  There are two EEOC commissioners who think that the commission should overhaul their guidance on employers use of criminal background checks.  There are two commissioners who either think that the current guidelines are sufficient or should be slightly modified.  And there is one commissioner who seems to be in the middle and will most likely be the ultimate deciding factor.

In the meantime, the EEOC has allowed a 15 day comment period on the issue.  Perhaps they’ll consider opinions counter to theirs’ then.  I’ll be holding my breath until then.

Stay tuned.  We have definitely not heard the last of this issue.

P.S. Once the smoke clears out of my ears, I’ll publish some of the materials that were provided to the EEOC in support of criminal background checks.

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We just published The Verifier XXIII, Summer 2011 Edition, a publication intended as an educational tool and information resource for human resource professionals or anyone interested in keeping abreast of recent employment screening and background check industry developments.

Highlights of this issue include the following:

Articles:

• Trends in Employment Background Screening: 2011 Results
• Introducing iEmployeeScreen mobile: Background Screening News at Your Fingertips
• A Modest Proposal: Social Network Background Checks Still Concern Me
• Background Screening Under Fire by The EEOC and Others
• Background Screening and The Candidate Experience

Announcements and Legislative Updates

• EEOC Hearing Scheduled on Use of Criminal Background Checks
• Connecticut Passes Law to Curb Use of Credit Reports
• Maryland Gov. Enacts Law to Curb Use of Credit Reports
• EmployeeScreenIQ Gives Back to the Community

Check it out!

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Effective July 21, 2011, Fair Credit Reporting Act (“FCRA”) adverse-action and risk-based pricing notices must disclose any numerical credit score that contributed to the: (1) adverse action; or (2) extension of credit on terms materially less favorable than those available to a substantial portion of customers.

If you are hearing this for the first time, you aren’t alone.  And here’s why most of you shouldn’t care.

These rules only apply if you are evaluating a credit score.  Remember that employment credit reports (most commonly used on employment background checks) do not include a credit score.

Why are we bothering you with this useless information if it doesn’t affect you?  Well, to let you know if you hear about it, that it most likely doesn’t affect you. If you are reviewing credit scores, you might want to read the information below provided by Seyfarth Shaw labor and employment attorney, Pam Devata.

The FCRA requires a person taking adverse action based in whole or in part on a consumer report to provide an adverse-action notice. Section 1100F of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act) amended Section 615(a) of the FCRA to require users of credit scores to include those scores, and related information, in adverse-action notices provided to consumers. The requirement to disclose credit score information in FCRA adverse-action notices also applies to adverse-action decisions not related to credit.

Consequently, when a user takes any adverse action based in whole or in part on information contained in a consumer report, regardless of the weight of the credit score in the decision, the user must provide the consumer with the following:

*          The credit score;

*          The range of possible credit scores under the model used;

*          All of the key factors that adversely affected the credit score

(not to exceed four factors, unless one factor is the number of inquiries made with respect to the report, in which case the key factors may not exceed five);

*          The date on which the credit score was created; and

*          The name of the person or entity that provided the credit score.

New Risk-Based Pricing Notice Requirements:

Risk-based pricing refers to the practice of setting or adjusting the price and other terms of credit offered or extended to a particular consumer to reflect the risk of nonpayment by that consumer. The FCRA also requires a creditor to provide a risk-based pricing notice to a consumer when the creditor uses a consumer report in connection with a credit application or review of an existing account and, based on the report, grants credit or amends existing credit on terms that are materially less favorable than the most favorable terms obtained by a substantial portion of consumers. The Federal Reserve Board (the

“Board”) and the Federal Trade Commission (“FTC”) recently amended their respective risk-based pricing rules to require disclosure of credit scores and information relating to credit scores in risk-based pricing notices if a credit score of the consumer is used in setting or adjusting the material terms of credit.

The Board’s and the FTC’s rules require the same additional information to be included in a risk-based pricing notice as is required for the adverse-action notices.  In addition, the risk-based pricing notices must include a prescribed statement explaining credit scores that includes a disclosure that the credit score was used in setting the credit terms. For example, a statement such as:

*          “Your credit score is a number that reflects the information in

your credit report.  We used your credit score to set the terms of credit we are offering you.  Your credit score can change, depending on how your credit history changes.”

The Board’s and the FTC’s rules also recommend that the risk-based pricing notices contain optional contact information for the entity that provided the credit score.

Common Questions:

The new rules raise a lot of questions, many of which are addressed in the commentary to the rules, such as: (1) whether credit score disclosures are required when only the credit score of a guarantor, co-signer, surety, or endorser is used (no disclosure is required); (2) whether there are safe-harbor model notices that can be used (yes there are); and (3) what to do when dealing with proprietary scores, three-party financing transactions, more than one applicant, no credit score, and multiple credit scores (the commentary addresses these questions as well).

Two of the more common questions, however, concern “what is a credit score” and “when is a credit score used.”  The commentary makes clear that a score that is not used to predict creditworthiness, such as an insurance score, is not a “credit score” and need not be disclosed.  The commentary also makes clear that “use” occurs at a very low threshold and if the credit score played any role in the decision (for example, if the credit score led the user of the credit score to investigate further and the results of that investigation played a role in the decision), then the credit score was used and must be disclosed.

Many of these same questions can also be answered by reviewing the “Forty Years of Experience with the Fair Credit Reporting Act” report that the FTC issued today and is available at http://www.ftc.gov/os/2011/07/110720fcrareport.pdf.  This report is the most up-to-date FTC guidance on interpreting the FCRA.

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Philadelphia Mayor Michael Nutter has signed into law the “Fair Criminal Record Screening Standards” which will prohibit both public employers and private employers with 10 or more employees from asking applicants if they have been convicted of a crime on the job application.  The law also prohibits employers from making an adverse hiring decision based on an arrest that did not result in a conviction.

This “Ban the Box” legislation (Bill No. 110111-A) was signed into law on April 13, 2011 and will take effect on July 12, 2011.   It is designed to allow those convicted of criminal activity a chance to make it further into the process before an employer can make such inquiries.

Background checks are still permissible and given the fact that employers cannot ask about convictions, it is vitally important they are conducted to ensure an informed hiring decision.

“Ban the Box” legislation is picking up steam across the country as many cities, towns and states have passed or are considering laws which they say will allow those with criminal records to have a fair chance of finding employment.  Most of these laws only affect public employers.  However, the states of Massachusetts and Hawaii are similar to Philadelphia in that they also apply to the private sector as well.

For more information about this law, check out Seyfarth Shaw’s publication, Philadelphia Passes A New “Ban The Criminal Box” Law That Applies To Private Employers.

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I think we’ve been fairly consistent with our message concerning the state of employment background checks in 2011.  There are many laws that govern their use and in truth, they’ve been around for quite some time.  However, we are seeing more and more legislation in this regard.

Labor and employment attorneys Dani Sanchez-Gleason at BMC Software Inc. and Richard Greenberg at Jackson Lewis recently published a must-read article about the top laws that employers need to know about background checks. I picked out a few highlights below but definitely encourage you to read their entire article, ” Top 10 State Background Issues”.

Compliance with State-Mandated Background Checks

Some industries, such as health care and education, often are required by state law to conduct specific background checks on industry employees.   In some instances, these checks can be conducted by a consumer reporting agency; in other circumstances, these checks need to be conducted by a state agency with access to the FBI or a similar database (in the case of criminal checks).   Employers must ensure compliance with such requirements.   There is not a level of consistency across the states as to these requirements, so a state-specific analysis is necessary.  For example, in some states but not others, an employer is required to conduct specified background checks on any individual who will be entering a home to provide service, such as a repair technician.

Compliance with State Background Check Procedural Requirements

Often, in developing compliant processes for background checks conducted through consumer reporting agencies, employers only consider the federal Fair Credit Reporting Act.  However, there are approximately a dozen states which have promulgated state mini Fair Credit Reporting Acts.  These mini-FCRA laws often track the FCRA’s consent and disclosure, pre-adverse action and adverse action requirements.   However, in certain instances, additional disclosure and/or language is required.  For example, California law requires an employer to disclose the specific checks being conducted as well as to provide information regarding the individual’s right to inspect the file maintained by the consumer reporting agency.  Other states like Minnesota and Oklahoma mandate that employers notify individuals of their right to obtain a copy of a report in all circumstances.  Further, in New York, depending on the scope of the check, a disclosure of the state’s limitations on use of criminal record information may be required.

Understand Reporting Limitations Imposed on CRA’s by State Laws

To avoid frustration, it is vital that all employers understand the limitations imposed on consumer reporting agencies by applicable state law.  Under the FCRA, a consumer reporting agency is not limited from reporting any convictions, but is generally limited to reporting other adverse information that is more than seven years old unless the individual’s compensation would be in excess of $75,000 per annum.   However, some state laws restrict reporting of convictions over seven years old unless certain salary thresholds are satisfied.  For example, in New York, criminal conviction information over seven years old may not be reported unless the individual is expected to earn over $25,000 per year.  Further, some state laws prohibit reporting of any arrest information and/or information regarding pending arrests.  While there is an argument that some of these reporting limitations are preempted by the FCRA, the available caselaw on this issue is limited.  These limitations reiterate the importance of a broad inquiry on the employment application regarding criminal history.

Follow State Limitations on Use of Convictions for Disqualification

While federal law does not impose any per se prohibitions on an employer’s ability to make job-related decisions based on an applicant’s or employee’s criminal conviction history, certain state laws impose such restrictions.  A handful of states specifically prohibit an employer from disqualifying an applicant/employee unless the conviction is job-related based on an individualized analysis.  In fact, New York imposes the strictest standard and requires an employer to consider numerous factors prior to making a disqualification decision, including the length of time since the offense and the individual’s rehabilitation.  Simply put, in New York, absent a conversation with the individual prior to disqualifying, there is a strong argument that the employer has not complied with the statute.  Again, industry requirements must be considered.  For example, in many states, alcohol beverage control law restrictions often require employers to disqualify applicants/employees with certain convictions from positions in which the establishment maintains a liquor license.

Of course, due to the EEOC’s focus on the adverse impact of employers’ use of information regarding criminal history, it is strongly recommended that all decisions be made based on an individualized, job-related analysis and that employer policies do not contain per se disqualification standards.

Analyze the Propriety of Internet Checks

Employers are increasingly turning to social media for information about job applicants. So long as the employer does not violate state or federal discrimination laws, nothing currently prohibits an employment decision based on information an applicant places in the public domain.  Nevertheless, employers should balance the need to obtain information against the risks associated with such searches.  Federal and/or state laws prohibit employers from basing employment decision in whole or in part on protected characteristics, such as race, age, sexual orientation, marital status, disability, genetic information sexual orientation and political affiliation.  Employers also should avoid circumventing a potential employee’s privacy settings by pretending to be someone else in order to gain access to a restricted network. A best practice is to obtain consent or at least disclose to individuals such checks are conducted.

Read Full Article

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The idea of the flexible workplace has been prevalent in our country for the last several years.  Why should a national or multi-national corporation pay for an office, when their employees can be just as effective or sometime even more effective from home?  Plus, many employees like to work outside of the traditional 9 to 5 hours.

Of course, with this flexibility comes the opportunity for abuse.  When hiring, employers need to make sure that the candidates they hire can handle this responsibility.  And of course, an effective background check can help.  Their are a number of tools employers can use to assess personal responsibility such as criminal records, motor vehicle records, employment references and even credit reports.

The reference interview is obvious.  Simply ask questions that focus on the candidate’s ability to work independently and whether they exhibited personal responsibility while on the job.  You would also think that using criminal records, motor vehicle records and yes, credit reports are fairly obvious. And on their face, they are.  However, rightfully so, many organizations will hire people with criminal records.  Perhaps, they don’t care about a minor possession charge or public drunkeness conviction.  However, a history of ticky tac violations definitley speaks to self control and personal responsibility.  Same goes for driving records.  An individual violation or two might not be of concern.  A history of violations could be pause for concern, even if the person is not going to be driving their car for work.  Again, it goes to personal responsibility.

I’ll stay away from the can of worms that no doubt would follow with my explanation on how credit reports can help.  I’ll just say that adverse credit combined with any of the above adverse information can certainly help you round out a body of work.

This concept of the flexible workspace is a great development for both employers and employees.  Employers just need to make sure that their employees are capable of succeeding in this environment.

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We all know that if an employer intends to conduct a background check through a Consumer Reporting Agency (employment screening company), that they must obtain an applicant’s written consent to do so.  Further, we know that if an employer decides to take adverse action against a job candidate or employee based on the outcome of a background check, they must provide them with proper adverse action notification.  Isn’t that background screening 101?

Evidently, no one told that to a school bus transportation company who has just settled a $5.9 million class action suit for failing to provide the requisite disclosures to applicants before running a background check on them and also failed to follow the required two-step adverse action process when they denied employment based on information revealed on a criminal background check.

Seyfarth Shaw FCRA attorney Pam Devata just posted a complete write up on the case.  See excepts below.

Under the Fair Credit Reporting Act (“FCRA”), an employer has a number of detailed requirements with which it must comply both before it can procure a background report (consumer report) about an applicant or employee, and if it intends to take action in whole or in part based on information in a consumer report. See 15 U.S.C. Sec. 1681 et seq. Specifically, an employer must: (i) have a permissible purpose for procuring a report in the first place; (ii) certify to the background screening company that it will comply with applicable law and will not use any information in violation of Equal Employment Opportunity laws or regulations; (iii) provide a written disclosure to the applicant or employee indicating that specific background checks will be conducted by a third party and obtain authorization from that applicant or employee to conduct such checks; and (iv) follow the detailed two-step adverse action requirements (including providing a copy of the report, a Summary of Rights, and a pre-adverse action notification letting a person know he or she could dispute inaccuracies in the report).

The Court in Hunter, et al v. First Transit,, Inc., Case Nos. 09-CV-6178 & 10-CV-7002 (N.D. Ill. Mar. 23, 2011), granted preliminary approval of the settlement for more than 143,000 class members. The Court has scheduled a final fairness hearing for August 1, 2011.

And here’s Pam’s big advice for all employers out there who conduct background checks

It behooves employers to view these cases as an impetus to evaluate their current policies and procedures relating to the use of background checks in employment and seek legal guidance to ensure compliance with the FCRA and similar state laws.

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Our U.K. strategic partner, Verifile Ltd. has published their 2011 report on diploma and accreditation mill activity and reveals an astounding 48% increase worldwide in the number of known diploma and accreditation mills in the past year alone. As the Internet is the primary home for these bogus education and accreditation providers, little action is taken to stop them from helping unscrupulous candidates deceive unsuspecting employers. This year’s Accredibase™ report examines the current status of the diploma mill situation and considers what can be done to protect the public and businesses.

The Accredibase™ report identifies the following red flags that may help in the identification of diploma mills*:

• The institution does not have authority to operate or grant degrees from the education authorities where it claims to be based.
• Degrees are delivered in a very short space of time – sometimes just a few days.
• Degrees are granted based entirely on work or life experience.
• Contact details are limited to an email address and the institution is vague about its location.
• The institution will allow the student to choose his/her own course title and specify the graduation year to appear on the certificate.
• Sample certificates, transcripts or verification letters are available to view on the website.
• Institutions make over-complicated or misleading claims about accreditation or recognition.
• The institution’s name is similar to that of a recognised and respected education institution.
• Internet domain names are misleading – such as ‘.ac’ instead of the regulated ‘.ac.uk’ used by higher education institutions in the United Kingdom.
• The website is poorly designed, has poor spelling and grammar or it plagiarises copy from other institutions.

Verifile’s proprietary database of diploma and accreditation mills, Accredibase™, keeps track of the credential fraud industry. Verifile’s Accredibase™ has identified approximately 5000 suspect educational institutions and accreditors, including 2,615 known bogus education and accreditation providers. In addition to the huge number of confirmed mills known to Accredibase™, new suspect institutions are discovered on a daily basis – more than 2,000 are currently under investigation by Accredibase™ for inclusion in the database.

Download the full report

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We just published a great article on EmployeeScreen University by Robert Jones, Director of Operations at Socrates Ltd. which analyzes the prevalence of employment screening in Brazil and the intricacies and nuances of performing background checks in country.

Here’s a sneak peek at how this international background check is performed:

Performing Background Checks in Brazil

Brazil has one of the world’s fastest growing and dynamic countries.  The country will host the 2014 Soccer World Cup and in 2016 the Summer Olympics will be held in Rio de Janeiro. By 2016 Brazil is projected to have overtaken France to become the fifth largest economy in the world (Source Brazilian National Bank for Economic Development (BNDES)).  The country was largely unaffected by the recent global financial crisis and continues to increase its influence on the world stage.

It is therefore understandable that in recent years there has been a significant increase in requests for background checks with a Brazilian component and the good news is that it is usually possible to perform screening inquiries with reasonable efficiency and efficacy.

Identifying Particulars

Let’s first look at how to establish unique identifying particulars:

1. A date of birth is a key identifier in Brazil. Dates are expressed as day/month/year.

2. Brazil is at times a confusing bureaucracy. For example, each citizen is required to have a Registro Geral (general registry) number, known as a RG number. Although this number appears on an official Brazilian ID card, The RG number is issued at the state level and also by a number of other bodies (such as the armed forces). Therefore, it is not only possible, but also legal, for an individual to have multiple RG numbers. Legal residents of Brazil, who are not citizens, are issued with a Registro Nacional de Estrangeiros (national register of foreigners) number, known as a RNE number. Because the federal police manage this registry at the federal level it is an unique identifier. However, for screening purposes, like the RG, it does not have much value.

3. Anyone that wishes to open a Brazilian bank account, purchase property, buy or lease a car or a cell phone, work for a company or otherwise participate in the local economy must apply for and receive a Cadastro de Pessoa Física(Individual Taxpayer’s number), known as a CPF number. It is worth noting that there is no residency or citizenship requirement for the issuance of a CPF number. This number is, for practical purposes, the only unique government issued document that can be relied upon during the identification process.

4. Brazilians speak Portuguese and a significant percentage of the population is of Portuguese heritage. Women normally adopt part of their husband’s last name upon marriage and children usually take the last name of both father and mother. Thus the child of Maria Silva and José Santos could be Lucas Silva Santos.  However, the child of Lucas Silva Santos would most likely take the grandfather’s name (Santos) and drop the grandmother’s name (Silva). That said, there is not definitive formula, which makes it important to have the mother’s name as well as an individual’s full name as a step in the identification process.

Identity theft is not unheard of in Brazil, but with a full name, mother’s name, CPF and date of birth, identification can be considered definitive.

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It’s common knowledge that a good onboarding program can improve a new employee’s engagement and productivity while also contributing to organizational performance. Yet employers are only beginning to grasp the importance of the candidate experience. Inside that world lies the critical stage of background screening.

EmployeeScreenIQ’s new white paper, Background Screening and The Candidate Experience, is a must-read for employers and HR professionals. Our paper explains how background checks can directly impact the onboarding process and your company’s brand.

Inside you’ll learn about:

• Viewing candidates as potential employees, clients, and/or consumers
• Maintaining transparency with background screening policies and practices
• The importance of verifying negative information before it’s reported
• Protecting your brand when a candidate disputes the findings of a background check
• Choosing a screening firm that’s dedicated to best practices and compliance
• And more!

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