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Employers and human resource professionals conducting pre-employment background checks will have to keep compliance top of mind in 2016, as focused regulatory oversight, a growing number of class-action lawsuits and the ever-present threat of data breaches impact screening programs and practices.
Regulators Will Turn Up the Heat on False Matches
Background checks are in the spotlight, either “because people think they are not extensive enough or, conversely, that they go overboard and are unfair to ex-offenders,” said Les Rosen, an attorney and the CEO of Employment Screening Resources, a background screening firm based in the San Francisco area. “However, what everyone agrees about is the need for accuracy, and the government agencies are now squarely focused on accuracy issues,” added the author of The Safe Hiring Manual (Facts on Demand Press, 2012).
Key to the debate are “false positives” and “false negatives.” A false positive is a misreported criminal record based on a database search or a name match where there are not sufficient indicators that the record is associated with the subject of the background check, or where a record has been expunged and should not have been reported, Rosen said. False negatives are missed criminal records that should have been reported.
Screening firms are obligated to utilize “reasonable procedures to obtain maximum possible accuracy” under the Fair Credit Reporting Act (FCRA). In October 2015, the Consumer Financial Protection Bureau (CFPB) ordered two of the nation’s largest employment background check firms to pay a total of $13 million for allegedly failing to take steps to ensure the accuracy of the information they reported about job applicants contained in background check reports.
The Federal Trade Commission and CFPB are conducting a sweep of the industry, said Pamela Q. Devata, a partner in the labor and employment practice group at Seyfarth Shaw, based in the Chicago office. The CFPB has highlighted several areas it is focusing on, including use of middle names in matching, common names and increased scrutiny on matching procedures generally, she said.
“Accuracy is critically important not only to the consumer, whom the laws and regulators are designed and created to protect, but also to the employer who relies on the information in the background check to make an informed placement decision,” said Melissa Sorenson, executive director of the National Association for Professional Background Screeners.
FCRA Class-Action Lawsuits Will Increase
Class-action lawsuits claiming noncompliance with the FCRA will continue to increase in 2016, experts agree.
“The Fair Credit Reporting Act has been a hotbed for litigation for a couple of years and does not show signs of slowing down in the near future,” Sorenson said. “One area of litigation that is on the rise, unfortunately, is litigation involving technical violations—claims involving one or two words on a disclosure form, for example.”
Sorenson is referring to the disclosure and authorization form required under the FCRA. It informs the applicant that, as part of the hiring process, the employer may perform a background check for employment purposes and the employer is seeking the applicant’s written authorization or consent to do so. The statute requires this disclosure in a completely stand-alone document, without any extraneous information.
Most FCRA class-action lawsuits against employers are over alleged violations that could have easily been avoided by a review of forms and processes, Rosen said. In addition to the required disclosure and authorization form provided before screening occurs, employers are obligated to provide a notice of intent to take adverse action form, a copy of the Summary of Your Rights under the FCRA and a copy of the background check to those applicants being turned away due to information found in the screen. Once a final decision not to hire has been made, employers must also supply the applicant with a final notice of adverse action letter.
“Lawsuits can include highly technical claims, even where there is no indication that anyone has actually been harmed, which means that legal compliance has become one of the most critical parts of background check services,” Rosen said.
"Cases brought against employers for alleged violations under the FCRA in 2015 proved to be costly given the lack of a cap on awards and no requirement to prove actual damages," said Christine Cunneen, CEO of background screening firm Hire Image, based in Johnston, R.I. Class actions against employers requesting background checks on applicants or employees are mushrooming. In 2015, BMW, Calvin Klein, Chuck E. Cheese, Food Lion, Home Depot and Whole Foods paid settlements ranging from $716,400 to $3 million in FCRA lawsuits.
According to Rosen, employers and background check providers face legal risks involved in background screening due to the increasing complexity of screening consent forms.
Sorenson expects this situation to worsen. “The result of this type of litigation is a change from one or two forms used to disclose and authorize the screening process to more forms for the candidate to complete,” she said. “More forms, disclosures and signatures add time to the hiring process and confusion for employers.”
The widely anticipated U.S. Supreme Court ruling in Spokeo, Inc. v. Robins will shed light on this issue, said Angela Preston, senior vice president and counsel for corporate ethics and compliance at SterlingBackcheck, a background screening firm in New York City.
The case asks whether plaintiffs are entitled to pursue statutory damages under the FCRA without showing actual harm or injury, she said. “If the court decides in favor of Spokeo, it could stem the tide of class actions,” she noted.
If the Supreme Court holds there is standing in federal court even when there is no concrete harm that is alleged, the Spokeo case could open a flood of new litigation at the federal level, Devata said. On the other hand, “if the opinion finds no standing, we may see an increase in the class claims brought in state court since the FCRA has concurrent jurisdiction. That could mean that nationwide class claims may be litigated in state courts all around the country.”
The Ban-the-Box Movement Will Continue to Spread
More states, localities and even the federal government in 2016 will impose ban-the-box laws removing questions about criminal history from job applications and delaying such inquiries until later in the hiring process.
“Practically on a monthly if not weekly basis, employers across the country are hearing about the various forms of proposed or passed ban-the-box legislation at the city, county and state levels,” said Vu Do, vice president of compliance at PreCheck, a leading background screening provider for the health care industry.
As of January 2016, more than 100 U.S. cities and counties and 19 states have ban-the-box restrictions in place. Legislation affecting federal contractors is making its way through the U.S. Senate. And President Barack Obama has asked the Office of Personnel Management to issue fair chance guidance affecting federal jobs.
Generally, ban-the-box laws prohibit employers from asking about an individual’s criminal record until after making a job offer. In most cases, the employer can withdraw the offer of employment if the applicant has a conviction record that bears a relevant relationship to the duties and responsibilities of the position. Some of these laws also limit the number of years an employer can look back into an applicant’s criminal history.
As more jurisdictions pass ban-the-box laws, a web of different legislation grows nationwide. “Employers across the country are struggling to keep up with state and city ordinances that are increasingly confusing and inconsistent,” Preston said.
Sorenson said various jurisdictions call for specific forms or time frames for the process and others have their own nuanced provisions that make compliance difficult for employers operating across jurisdictions. “Further, an often-overlooked side effect is that the complexity and time delays built into some of these laws can make it more difficult for candidates in those jurisdictions to be hired,” she said.
Social Media Background Checks Will Come Under Scrutiny
More employers will examine applicants’ social media posts and online activity in 2016. About 4 in 10 organizations said they used social media or online searches to screen job candidates in 2015, an increase from 33 percent in 2013, according to a survey released by the Society for Human Resource Management.
Social media background checks generated a buzz following a mass shooting at a holiday party in San Bernardino, Calif., in Dec. 2015. It was initially reported that the visa background check for one of the shooters allegedly failed to include a search of publicly available social media. Afterward, senators introduced legislation calling for the vetting of social media accounts as a part of visa background checks. "With all of the media attention surrounding this case, employers may be compelled to consider adding social media searches to their background screening programs in 2016," Cunneen said.
Dan Shoemaker, managing director of the Americas for background screening company HireRight, headquartered in Irvine, Calif., expects to see new legal and regulatory developments catch up with the quickly evolving practice. “Social media is an established element in recruiting. However, many employers are reluctant to incorporate it as part of the screening process, as there are legal hurdles and questions that have not yet been fully addressed,” Shoemaker said. “There are clear risks employers must understand if they conduct social media checks, including concerns over candidate privacy, data accuracy of social media profiles and risks for potential discrimination claims in simply viewing social media profiles.”
Several existing federal laws, such as Title VII of the Civil Rights Act of 1964, the Stored Communications Act, and the Computer Fraud and Abuse Act, may protect workers against discrimination and privacy violations related to social media, Shoemaker said. In addition, some states have passed legislation prohibiting employers from accessing workers’ private accounts.
“If an employer decides to conduct social media screening, it’s critical that the organization has a comprehensive policy that outlines the use of the information in its screening practice,” he said.
Integrations with Applicant Tracking Systems Will Increase
Legal risks resulting from data breaches and litigation over consent forms will lead applicant tracking system (ATS) operators to review and modify integrations with background screening partners, according to experts. “A growing number of organizations are developing integrations with their ATS and background screening partners to significantly increase efficiency and reduce data entry and workflow steps,” Shoemaker said.
These integrations are becoming the norm, Sorenson said. "One extra keystroke or the need to access multiple systems in order to complete a process can add up to hours of wasted time, as well as increase the risk of noncompliance," Cunneen said. "Hiring managers should expect to be unchained from their desks when it comes to managing the background screening process and applicants should expect an easier, more transparent process from start to finish."
“Employers and HR professionals are getting an understanding that they are better served where the ATS and the screening firm have a tight integration and close relationship as opposed to using systems that just exchange data with anyone and do not account for the many complexities and legal issues involved in hiring,” Rosen said. “Although plug-and-play is a useful model in many areas, it may not serve employers well when it comes to regulated and litigated areas like hiring.”
But there are several critical issues employers must consider. According to Rosen, the dramatic growth of class-action lawsuits and the rise of data breaches have made ATS operators rethink their responsibility for housing background screening data due to the liability of a hacker accessing private information.
“With increased litigation and increased regulator presence both domestically and overseas, applicant tracking systems, consumer reporting agencies and employers will all be responsible for the data that was once collected primarily by employers,” Sorenson said. “All three parties will be held to the same standards and expectations for gathering, retaining and transmitting data.”
Do said it is critical that employers partner with a collaborative ATS vendor willing to work with the screening provider to ensure that all applicable consent forms are displayed and behave properly in the system.
As “employers become increasingly aware of legal risks associated with noncompliant background check disclosure and authorization forms, they’ll not only need to ensure their screening partners are well-versed but that their ATS integration accommodates the technical requirements, which can be fairly nuanced,” Do added. The current focus is on disclosure forms that include extraneous information by, for example, being embedded within the job application or by incorporating liability release statements for the employer.
In addition, “any integrated solution must be built from the ground up with high levels of multi-layered data security technologies and protocols that use administrative, physical and technical safeguards to help protect and secure the information processed and stored,” Shoemaker said.
Roy Maurer is an online editor/manager for SHRM.
Follow him @SHRMRoy
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