Legal, regulatory issues making background checks more difficult

HireRight, a California-based provider of employment screening services which has nearly 40,000 clients globally including half of the Fortune 100, recently released the results of its 2012 Employment Screening Benchmark Report. The report, which included responses from more than 2,200 professionals in large, medium and small companies across a variety of industries, found that recruiting and retaining qualified employees remains a huge challenge for many organizations.

Approximately 70 percent of respondents reported that they had uncovered a falsehood on a job applicant’s resume. Despite the inherent challenges of sorting through a crowded market of job seekers to match the right people with available positions, federal and state authorities have compounded matters for companies by passing new laws and rules governing how organizations can use background checks when evaluating an applicant’s qualifications.

According to Rob Pickell, chief marketing officer and senior vice president of strategy for HireRight, the employment screening landscape has changed dramatically over the past 10 years. During the first half of the previous decade, Pickell said that background screening became easier because of the evolution and implementation of technology.

"We were able to build software and leverage the Internet in a way that it was much easier for companies to develop, implement and manage a screening program," Pickell said. "Previously, I always described the period of our industry before the Internet as the fax, the phone and the feet. Can you imagine running a (screening) program for a Fortune 100 business on a global basis that is completely paper and personnel based? It would be very difficult to do it and to be in a position to ensure that the goals of your program are actually being met."  

While technology has continued to make the job of employment screening easier, Pickell said that he’s seen a change over the last three to four years with an increase in the legal and regulatory hurdles that are being placed on organizations looking to thoroughly vet job candidates.

"The regulatory and legal environment has gotten far more difficult for companies and it is really being driven by two things; a lot more legislation has been passed that impacts background screening, most typically state-based legislation… and then on the legal side, lawsuits around how companies utilize background checks have certainly gone up and I think it’s a response to the fact that unemployment is higher and anything associated with employment has a higher degree of scrutiny on it," explained Pickell.

One big legal issue that many employers find themselves having to navigate is state laws surrounding medical marijuana use. According to the survey, 78 percent of respondents said that their organization conducts some type of drug or alcohol testing. However, because at least 17 states have legalized marijuana use for medical purposes, Pickell said that it can put companies in a difficult situation.

"If a state has rendered medical marijuana use legal, it creates a very difficult dynamic for an employer because under federal law that use is still illegal," he said. "If you have a drug testing program and a drug free workplace program, you now have two conflicting sets of laws to try to rationalize."

Among some of the other legal and regulatory issues facing companies with regards to background checks, according to Pickell, include the use of credit records in evaluating job applicants, whether companies can or cannot look at a prospective employee’s social media postings and new guidelines issued by the Equal Employment Opportunity Commission. The EEOC recently said companies that use hiring policies that exclude job applicants based on their criminal histories must link specific criminal conduct and its dangers with the risk involved in the duties of the job that person is applying for or the organization could be at risk of being found to be discriminatory.

Although there has been a lot of attention in the media about how companies are using social media to vet job applicants with Maryland’s recently passed law that prohibits employers from requiring current and prospective employees from turning over their social media information, Pickell said there hasn’t been much in the way of legislation nationwide on this issue. And while 61 percent of survey respondents reported using social media to recruit job candidates, only 24 percent said that they used it as part of their background screening process. Pickell said that there a number of reasons organizations have been hesitant to use social media as a part of this process.

"There are four general responses we get back when we ask that question… and the first one is that a company will believe that social media is something that is in the realm of private information to the individual and given the nature of their business and their culture, they feel like that is out of bounds for their objectives for screening," he said. "A bigger reason is companies are very rightfully concerned  about unresolved legal issues around social media and that comes in two forms - anti-discrimination laws… and the other area is really around rules that regulate a background check, which are generally under the Fair Credit Reporting Act and those rules were written around traditional written records. A lot of companies are taking a wait and see attitude because they don’t want to be on the leading edge."

Pickell added that since so many companies are using social media as a recruiting tool, in many cases they’ve already seen what an individual is posting in cyberspace while others may not believe it’s worth the effort of checking.  

While a majority of respondents (94 percent) said that they conducted background checks on job applicants, only 40 percent reported conducting checks on the extended workforce such as temporary staff. Though it may seem like many employers are opening themselves to legal exposure by not more thoroughly digging into the background of the extended workforce, Pickell said companies have made significant strides in this area.

"The way I would characterize this and the evolution of screening is, for many years, companies’ primary focus was on maturing screening programs for their primary workforce. When you think about the first half of the last 10 years versus the second half, companies really improved the sophistication, the maturity, they applied better technology around the core program and then they started saying 'hey, we’re doing a good job there, where else do we have exposure?' And the two areas that emerged were the extended workforce and non-U.S. employees," Pickell explained. "Over the last five or six years, the utilization of background checks across both of those classes of individuals has grown relatively significantly, but it’s nowhere near complete coverage."

Pickell said that many companies may also not be screening the extended workforce because the use of that labor is infrequent and low-risk, such as bringing in strategic consultants from a large accounting firm.

Pickell believes that employers need to continue to be embracive of technology in background screening, which will only further their goals of matching the right people with the right position while at the same time, protecting them from the potential liability of making the wrong hire. "I think companies have done an outstanding job of pressing the industry and suppliers to keep providing more value and better solutions," he said.