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3 Employment Screening Trends to Know Before You Hire in 2020

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​Compliance will be front and center for organizations that conduct pre-employment background checks in 2020. 

Experts believe that the number of class-action lawsuits brought under the Fair Credit Reporting Act (FCRA) for technical errors will increase; more states and cities will pass ban-the-box laws, salary-history bans and marijuana screening limitations; and federal and state regulators will direct more scrutiny toward the use of artificial intelligence (AI) in the screening process.

[SHRM resource page: Background Checks]

FCRA Claims Will Rise

Class-action lawsuits that claim violations of the FCRA, even for technical errors, can be very costly to employers. Companies have paid out $174 million over the past decade to settle FCRA claims, according to data from Good Jobs First, a Washington, D.C.-based nonprofit resource center that tracks corporate crime and misconduct.

"The exposure from having bad forms—particularly if you are a larger employer—can mushroom to major liability," said Les Rosen, an attorney and founder and CEO of Employment Screening Resources, a background-screening firm in Novato, Calif.

Kevin Bachman, founder of the CRA Doctor, a consultancy focused on improving the background-check process for employers and screeners, said that plaintiffs and attorneys think the lawsuits are lucrative, and he expects to see more in 2020. "More employers are doing background checks than ever before, and those looking to file and certify have plenty of opportunities," he said.

Rosen added that even if a federal court doesn't take a case, state courts are another potential venue.

The simple solution is to ensure that you:

  • Obtain written consent from applicants before conducting a background check.
  • Disclose that a background check is being performed in a separate, stand-alone document.
  • Allow enough time for an applicant to respond to an adverse action.

"Employers should be routinely reviewing their forms and modifying them to stay ahead of the curve," said Jennifer Mora, an attorney with Seyfarth Shaw in Los Angeles.

Some thought that the 2016 U.S. Supreme Court ruling in Spokeo v. Robins—in which the court decided that plaintiffs must prove actual harm in lawsuits for alleged technical violations to establish standing—would lead to a decrease in FCRA claims for technical errors.

Some FCRA lawsuits have been dismissed or decertified since the decision, but "that doesn't mean that these cases can't still be brought. Laying down your guard on FCRA compliance is dangerous," Rosen said.  

He added that courts are slowly paying more attention to Spokeo, and handing down decisions which basically say, "if there's no harm, there's no foul," but the liability risk still exists and there's no guarantee that any particular judge will rule in the employer's favor.  

Bachman said that the recent year-over-year increase in FCRA claims for technical violations has changed behavior among screening firms. "More screeners are reviewing their operations and compliance methods to remove or amend procedures which could draw the attention of plaintiff's counsel or regulatory agencies," he said. "They're now pretty aware of what's happening out there. Over the last few years, my conversations with screening companies have shifted from informing them about new lawsuits toward more proactive conversations about preventing them."

Rosen believes that once the issue of technical errors on forms settles down, the next litigation area is going to be on the accuracy of reporting, and more specifically, how many points of data background check providers should confirm before reporting a criminal record.      

Patchwork of Laws Will Grow

State and local laws on pre-employment screening will continue to spread in 2020. "There are more jurisdictions, both at the state and local levels, with ban-the-box laws and salary history bans than ever before," said Christine Cunneen, CEO of Providence, R.I.-based background-check company Hire Image.

Currently 35 U.S. states and more than 150 cities and counties have passed ban-the-box laws, which in most cases remove questions about criminal history from job applications and delay asking about it until a conditional job offer has been made. Maryland is the latest state to ban the box, effective Feb. 29.

Salary history bans, which prohibit recruiters from asking candidates about past compensation, have been passed in 17 states and 20 localities. The goal of salary history bans is to base compensation on work performed and not on previous pay that may reflect and perpetuate discrimination.

"These laws, and various types of marijuana laws [which prohibit employers from rejecting a candidate based on a positive marijuana drug screen], severely restrict the information to which a prospective employer has access in order to make hiring decisions," Cunneen said. "While the reasoning behind these laws is sound, unfortunately, there is not much in terms of protecting the employers, who will, unfortunately, continue to struggle with the need to balance their decision-making process in the face of compliance with all of these laws and the effective running of their businesses, including protection of their customers and property."

Rosen added that a big challenge for multijurisdictional employers is keeping up with all the different state, county and city statutes and their procedural differences. "Which law has precedence and which law applies in which case?" he asked. "Is it where the applicant lives? Is it where the job is located? The problem is that instead of a clear line, there's the possibility of multiple and conflicting laws."

Employers will have to update their policies and procedures to remain in compliance, Cunneen said. "What can and cannot be asked during the interview process should be clearly documented in the company's hiring policies. Drug screening policies should include how CBD [cannabidiol, an active ingredient of cannabis and an essential component of medical marijuana] use is handled and reasonable accommodations as it relates to medical marijuana and the American Disabilities Act."

Mora said that employers should expect to see more laws that restrict employers from testing for marijuana. On Jan. 1, Nevada became the first state to prohibit employers from denying employment based on a positive marijuana drug test. New York City passed a similar law which goes into effect May 20.

She added that 2020 may be the year that litigation is introduced for violations of salary history bans and ban-the-box laws. "At some point, someone will get sued," she said. "State agencies are aggressively enforcing these laws, but we haven't seen private-action lawsuits yet, as far as I know."

The situation is not expected to improve this year, experts agreed. "It will probably get more confusing before it gets any clearer, because it's easier to get a city council or statehouse to pass a law than the U.S. Congress [to approve one national law for all jurisdictions]," Rosen said.

Screening Tech Will Come Under the Spotlight

The use of emerging technologies such as artificial intelligence (AI), machine learning and algorithms for screening applicants will generate more scrutiny in 2020.

Automated resume parsing, AI-powered assessments and algorithm-based hiring platforms are gaining popularity, leading to concerns from academics, interest groups and regulators.

"Human decision-making is clouded by bias, but so is automated decision-making, especially given that human biases can be introduced at any stage of the process, from the design of the hiring algorithm to how results are interpreted," said Ifeoma Ajunwa, an assistant professor of employment and labor law at the Industrial and Labor Relations School at Cornell University in Ithaca, N.Y. "We cannot rely on automated hiring platforms without adequate safeguards to prevent unlawful employment discrimination. We need new laws and mandates to achieve that goal."

Lawmakers are trying to catch up with the advances in technology. Illinois was the first state to pass a law—the Artificial Intelligence Video Interview Act, which took effect Jan. 1—which provides rights to job applicants if AI will be used to analyze their video interviews.

The issue has been taken up by the U.S. House Education and Labor Committee, and regulatory agencies such as the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau have held hearings and workshops trying to understand its impact. While the Equal Employment Opportunity Commission does not yet have an official policy on AI-based tools in the workplace, it has said that the employer must assess the benefits of these tools against increased exposure and risk of violating existing employment laws such as Title VII of the Civil Rights Act of 1964.

The Electronic Privacy Information Center, a public interest research organization based in Washington, D.C., filed a petition Feb. 3 asking the FTC to investigate and regulate the use of AI, facial recognition technology, biometric data and algorithms in pre-employment screening and hiring decisions.

Soon, machine learning could be used by background check firms to increase efficiencies, automatically analyze large amounts of data and pinpoint whether or not a case is reportable or not. "AI has potential with screening, but the idea that this magic machine can pick out whether a person is qualified for your job and has the right skill sets is not here yet," Rosen said.

He added that "the jury's still out" on one of last year's most buzzworthy screening trends—continuous monitoring. "In some states, continuous monitoring is helpful because the underlying data set is pretty good, but in other jurisdictions the underlying data sets are awful. There are courts that don't provide data, or don't update it, or have not digitized it. Databases are full of false positives and false negatives. The idea that there's a miraculous source of all-knowing information is misleading and not the panacea that the marketing materials make it sound like."

Cunneen expects the adoption of continuous monitoring services to grow in 2020 beyond high-profile use by gig-worker companies such as Uber and Lyft that are using it already. "Technology has made it easier than ever to continuously monitor employees for indications of illegal behavior or reckless driving reports," she said. "But employers must make sure to have the employees' consent to continue to conduct background screenings and should ensure the technology used is providing objective recommendations, with no perceived or actual built-in biases."

Without human review, all of these technologies rightfully raise concerns, Bachman said. "But too many manual processes present profit and accuracy challenges. There's a middle ground, and screeners are working hard to find it."


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