EmployeeScreenIQ Blog

A few days ago the Federal Trade Commission released some inaccurate information to consumers regarding criminal background checks.  In an excerpt:

Your credit report has information about where you live, how you pay your bills, whether you’ve been sued or arrested, or have filed for bankruptcy. Credit reporting companies sell the information in your report to employers, creditors, insurers and other businesses that, in turn, use it to evaluate your applications for employment, credit, insurance, or renting a place to live. Employers also are allowed to use credit reports to evaluate an employee for retention, promotion or reassignment. That’s why it’s important to review your credit report periodically and to make sure the information it contains is accurate, complete and up-to-date. Your credit report is available to you for free, once every 12 months from each of the three nationwide credit reporting companies, if you ask for it.

Most of the above information is true, however the part about arrests and what a credit reporting agency even does is misleading.  I believe the author has confused  the difference between a credit reporting agency and a consumer reporting agency.  A credit reporting agency would be a company such as Equifax, Experian and Transunion, companies that are in the business of selling credit reports.  A consumer reporting agency (as defined by the Fair Credit Reporting Act) would be a company such as EmployeeScreenIQ or any full member of the National Association of Professional Background Screeners (NAPBS).  These Consumer Reporting Agencies (CRA’s) would in fact provide the other information the article refers to.  The article however does lend some good advice to consumers but should be amended to provide the distinction described above.  For the full article click here!

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Once again a brilliant quote by Attorney Pamela Devata of Seyfarth Shaw.  This is a timely article seeing as we just recently published a white paper on credit reports and background checks.

TransUnion, the Chicago-based credit reporting agency controlled by the powerful Pritzker family, is fighting to preserve the use of credit checks in employment screening, even as several states, including Illinois, threaten to outlaw the practice in most circumstances as discriminatory.

The company is one of three major credit bureaus that collect information on the borrowing and bill-paying habits of most Americans. They make money from employers and financial institutions that use such information in helping guide their decisions about lending, extending credit, housing and hiring.

TransUnion’s chairman, Penny Pritzker, serves on the President’s Economic Recovery Advisory Board, charged with advising Barack Obama’s economic recovery efforts. Some say her company’s lobbying efforts, which have extended to Oregon and Connecticut, undermine the nation’s goals of getting back to work more than 15 million unemployed people in the U.S.

TransUnion has publicly defended credit checks as a way for employers to protect themselves against theft and fraud. The thinking is that someone who has a poor credit history or has gone bankrupt might be more likely to engage in unethical or illegal behavior, especially in jobs where they handle money or are involved in financial matters.

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Not directly related to the background screening industry, however, this was the biggest background check story of the last century!   Twenty-nine years ago today, President Ronald Reagan was shot in the chest by a deranged man, John Hinckley Jr.

Reagan was walking out of the Washington Hilton Hotel in Washington, D.C., on March 30, 1981, when Hinckley, standing among a group of reporters, began firing at the president and others in his group.

One of the six shots collapsed Reagan’s lung. White House Press Secretary James Brady was shot in the head, while Secret Service agent Timothy McCarthy and D.C. Police Officer Thomas Delahanty were also shot. Reagan, 70, was able to walk into the hospital under his own power and resumed some of his duties the following day after surgery. More

This set off a culmination of events that would later produce what was known as the “Brady Bill.” Also known as the Brady Handgun Violence Prevention Act, it instituted federal background checks on firearm purchasers in the United States.  According to Wikipedia:

The Brady Act requires that background checks be conducted on individuals before a firearm may be purchased from a federally licensed dealer, manufacturer or importer – unless an exception applies. If there are no additional state restrictions, a firearm may be transferred to an individual upon approval by the National Instant Criminal Background Check System (NICS) maintained by the FBI. In some states, proof of a previous background check can be used to bypass the NICS check. For example, a state-issued concealed carry permit usually includes a background check equivalent to the one required by the Act. Other alternatives to the NICS check include state-issued handgun purchase permits or mandatory state or local background checks.

Section 922(g) of the Brady Act prohibits certain persons from shipping or transporting any firearm in interstate or foreign commerce, or receiving any firearm which has been shipped or transported in interstate or foreign commerce, or possessing any firearm in or affecting commerce. These prohibitions apply to any person who:

1. Has been convicted in any court of a crime punishable by imprisonment for a term exceeding one year;
2. Is a fugitive from justice;
3. Is an unlawful user of or addicted to any controlled substance;
4. Has been adjudicated as a mental defective or committed to a mental institution;
5. Is an alien illegally or unlawfully in the United States;
6. Has been discharged from the Armed Forces under dishonorable conditions;
7. Having been a citizen of the United States, has renounced U.S. citizenship;
8. Is subject to a court order that restrains the person from harassing, stalking, or threatening an intimate partner or child of such intimate partner, or;
9. Has been convicted in any court of a misdemeanor crime of domestic violence.

Section 922(n) of the Act makes it unlawful for any person who is under indictment for a crime punishable by imprisonment for a term exceeding one year to ship or transport any firearm in interstate or foreign commerce, or receive any firearm which has been shipped or transported in interstate or foreign commerce.

From 1994 through 2008, 1.8 million attempted firearm purchases were blocked by the Brady background check system. For checks done by the Federal Bureau of Investigation  in 2008, felons accounted for 56 percent of denials and fugitives from justice accounted for 13 percent of denials. In April 2009, the FBI announced it had completed its 100 millionth NICS approval since its inception 10 years before.

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It’s official.  Both the media and the government are turning the screws on employers using credit reports as part of their job candidate background screening process.  Every day, we are seeing more and more state laws introduced to curb the use of credit reports and in the case of a federal bill sponsored by U.S. Rep Steve Cohen (D. Tennessee), HR 3149 an attempt to ban them altogether from the hiring process.

Certainly, there are employers out there who have abused the privilege of reviewing this information.  However, the vast majority of employers who utilize credit reports are doing so legitimately and only when necessary.  SHRM reports that nearly 47% of all employers use them for certain job positions.  I am not the great defender of credit reports, but an all-out ban of them would be disastrous for some employers and their customers.  There are many unintended consequences of making this practice illegal.  It is these consequences that have caused California governor Arnold Schwarzenegger to veto a bill introduced to do so not once, but twice.  The governor argued, “This bill would significantly increase businesses’ exposure to civil actions over the use of credit checks. Further, the bill would increase administrative costs to those employers who must legitimately use credit reports as a screening tool by requiring that the employer first abide by its onerous requirements. California employers and businesses have inherent needs to obtain information about applicants for employment. The bill would become a new employer obstacle to the use of available information needed to make hiring decisions.”

The Wall Street Journal published a balanced article in this morning’s paper about this issue which identifies the concerns of job applicants while highlighting the needs of employers to arm themselves with such information. Take a look.

In the meantime, SHRM also published an article this morning that discussed the EEOC plans to address this issue in the next 12-18 months.  They also offered some solid advice from attorney Leslie E. Silverman, partner at Proskauer Rose LLP, in Washington, D.C. for what employers can do to ensure that their practices don’t invite litigation:

“It would be really risky for your company to use a ‘one-size-fits-all’ policy,” Silverman said in a March 3, 2010, Society for Human Resource Management webcast. “A blanket application of credit checks [provides] your company with less of an ability to argue that it is job related,” she said. Silverman advised that HR:

• Be selective on which positions to subject to a credit check.
• Be able to articulate a rational reason on why a credit check is needed for predicting job performance and related to the business functions.
• Ensure that your managers use only the information relevant to the job in question that is needed to make an employment decision. “Avoid making decisions based on extraneous issues if you can avoid it,” Silverman said.
• Allow your candidates to explain the reasons for negative credit information. “This will place you in a better position to assert that the credit information really was job related and consistent with business necessity,” she said.

For the record, most employment attorneys and employment background screeners have been saying this for a long time.

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Great blog posting out of HRMorning.com yesterday about the EEOC and employment background investigations.

When the Equal Employment Opportunity Commission started noticing an increase in discrimination suits based on background checks, the agency decided to warn employers about practices that could get them in trouble.

The EEOC program designed to combat discriminatory practices tied to background checks is called E-RACE (Eradicating Racism And Colorism from Employment). It started when the agency noted, in the last few years, a steep climb in complaints from applicants who said they were unfairly excluded from competing for a job because of information that showed up on a background check.

What sort of information? On the face of it, nothing extraordinary — a criminal record or a poor credit rating. The problem came when applicants were able to show that the criteria used had a negative impact on hiring opportunities for black and Hispanic males, who statistically have higher arrest rates and lower credit scores than white males.

Here are two background-check practices that have caused the biggest headaches — with the EEOC and in court — for employers:
Blanket policies against hiring anyone with a criminal record or poor credit score. The sticking point for such policies is that, without knowing it, an employer could routinely give preference to whites. What to do: Check to see if your practices exclude most blacks and Hispanics, whole opening the door to white applicants. If you see a pattern, the EEOC may see one, too.

Failing to show the correlation between background checks and the job itself. The EEOC and the courts generally recognize that some background material may have some bearing on the applicant’s suitability for the job. In the most obvious instance, for example, you wouldn’t be expected to hire a convicted embezzler to handle cash. There are other situations that apply — contact with customers, driving company vehicles, dealing with minors, etc. You’re on safer ground if you can show those correlations between background checks and suitability.

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In a monumental decision this weekend the Obama administration is changing the governments course on federal marijuana laws.  According to the Associated Press:

Federal drug agents won’t pursue pot-smoking patients or their sanctioned suppliers in states that allow medical marijuana, under new legal guidelines to be issued Monday by the Obama administration.

This puts many U.S. Employers and the U.S. Government as an employer in an ethical quandary.  Many employers use extensive background screening services such as EmployeeScreenIQ to screen potential candidates.  As part of this process substance abuse testing may be included.  Many employers use the Department of Transportation‘s (DOT) drug free workplace policies as a standard.  With fourteen states already allowing medical marijuana one can only wonder how these employers are supposed to react to these new policies.

This blog is not intended to start a “for or against” type of debate but more so to see how employers will react to the news.  In Ohio we don’t have medical marijuana but its gaining momentum.  Ohio is has great incentives for employers to create drug free workplaces.  Should it pass here it could create a tidal wave of questions from employers!

Feds to Issue New Medical Marijuana Policy

WASHINGTON – Federal drug agents won’t pursue pot-smoking patients or their sanctioned suppliers in states that allow medical marijuana, under new legal guidelines to be issued Monday by the Obama administration.

Two Justice Department officials described the new policy to The Associated Press, saying prosecutors will be told it is not a good use of their time to arrest people who use or provide medical marijuana in strict compliance with state law.

The guidelines to be issued by the department do, however, make it clear that agents will go after people whose marijuana distribution goes beyond what is permitted under state law or use medical marijuana as a cover for other crimes, the officials said.

The new policy is a significant departure from the Bush administration, which insisted it would continue to enforce federal anti-pot laws regardless of state codes.

Fourteen states allow some use of marijuana for medical purposes: Alaska, California, Colorado, Hawaii, Maine, Maryland, Michigan, Montana, Nevada, New Mexico, Oregon, Rhode Island, Vermont and Washington.

California is unique among those for the widespread presence of dispensaries — businesses that sell marijuana and even advertise their services. Colorado also has several dispensaries, and Rhode Island and New Mexico are in the process of licensing providers, according to the Marijuana Policy Project, a group that promotes the decriminalization of marijuana use.

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I first learned of this famous latin phrase as a criminology major at Kent State University.  Quis custodiet ipsos custodes? is a Latin phrase from the Roman poet Juvenal, which literally translates to “Who will guard the guards themselves?”, and is variously translated in colloquial English as “Who watches the watchmen?”  I felt it appropriate when reading the following article about Senate Bill 447 in California.

Governor to consider bill barring ex-cons from doing background checks

Lori Consalvo, Staff Writer
Created: 07/29/2009 07:57:44 PM PDT

Now that Gov. Arnold Schwarzenegger has signed the state budget, he has to decide whether to sign more than 100 new bills.

Among the measures that will soon be placed on his desk is Senate Bill 447, which would ensure that people with a criminal past can’t conduct background checks for prospective employees and members at agencies, such as the Boy Scouts.

Lawmakers backing the bill expect it to hit Schwarzenegger’s desk within the next week.

Once the bill is sent to the governor, he would have 12 days to sign it.

The Assembly passed the bill on July 13, after it received Senate approval in May.

“It’s a great, great idea,” said Susan Warren, co-founder and co-director of Project Think in Claremont. “I don’t think we can be too careful checking the backgrounds of individuals who are going to be working with children, or checking those supervising children, who are our most important resources for the future.”

Project Think is an active-learning summer program for preschoolers to eighth-graders. Warren has been a teacher and principal for 22 years and is a professor and director of masters programs and education at Azusa Pacific University.

There are 36,000 youth organizations in California that require criminal background checks for prospective members. But the person conducting the background checks can also review his or her own past.

“We can’t take that chance because that could ruin a child’s life,” Warren said.

Bill sponsor Sen. Leland Yee, D-San Francisco, said the loophole could lead to an ex-con supervising an organization’s background check process unbeknownst to other agency members.

The bill would require the state Department of Justice to review the criminal past of potential record custodians to confirm whether they are suited for the position.

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The New York Times is reporting that Democrats have dropped the contraversial “Card Check” provision to the Employee Free Choice Act.  As many of our readers know, SHRM’s Michael Layman discussed this bill in detail during his podcast on the EmployeeScreen IQ Blog.  While I am confident SHRM will still fight this bill, it’s process will now be more Democratic.

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It appears that  HR 3149 was introduced yesterday and Referred to Committee.  HR 3149 is a bill set to amend the Fair Credit Reporting Act (FCRA) to prohibit the use of consumer credit checks against prospective and current employees for the purposes of making adverse employment decisions.  EmployeeScreenIQ and EmployeeScreen University have written about this topic many times in the past.  As an industry, pre-employment credit reports are only suggested to be used when necessary and only for the responsibilities of that particular position.  In fact, the EEOC and FCRA already have provisions that the adverse information can only be used if it fits within the scope of the job. Most background screening programs only impliment this type of check as part of a much broader search.

Section three of the bill provides some exceptions but does not take into account most of them.  We suggest you spend some time reading this bill and write your congressperson to oppose it.  We agree the intent of this bill is to get more people to work.  However, as with most legislation, there are some unintended consequences.  There must be provisions for positions that could be negatively effected by a person with a poor credit history.  This 111th Congress has a horrible track record already for not even reading bills before voting.  Reach out and make a difference, make them read it, make them amend it!

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According to this article there are a bunch of bills in Louisiana that will expand an employers rights to do background checks to identify sex offenders.

Package of bills targets sex offenders

The Department of Social Services is pushing legislation that would allow for more extensive background checks on employees who have close contact with children.

Currently, state child abuse and neglect investigators, employees with supervisory or disciplinary authority over children, and other employees who could potentially be alone with children, are subject to state background checks and are checked against the registered sex offender database, DSS Secretary Kristy Nichols said.

House Bill 703, sponsored by state Rep. Kay Katz, R-Monroe, would authorize the department to do national background checks on those individuals, as well as staff that license the homes in which abused and neglected children live.

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