In Some States, You Cannot Request a Credit Report for Most New Employees

In their quest to hire reliable and trustworthy employees for open positions, many employers have turned to credit reporting agencies for applicant background information. Although such information may be readily available, obtaining it could lead to possible liability if the appropriate policies and procedures are not in place.

Discrimination Claims
Under Title VII, employer practices – such as basing hiring and other employment decisions on credit history information – that weigh more heavily on individuals within protected categories could lead to discrimination claims. For instance, if an employer’s use of credit reports has the effect of excluding women or minorities from certain positions, that practice could lead to liability.

In addition, a number of states have enacted or are considering enacting laws that explicitly prohibit discrimination on the basis of credit histories. For instance, Illinois’ newly enacted Employee Credit Privacy Act, which goes into effect on January 1, 2011, prohibits employers from inquiring about an applicant’s or employee’s credit history and from ordering or otherwise obtaining an applicant’s or employee’s credit history or credit report from a consumer reporting agency. Despite the potentially broad reach of Illinois’ new Act, there are several exceptions including:

• Situations where an employer can show that a satisfactory credit history is a “bona fide occupational requirement” for a position, which is further defined in the statute;
• Employers who are banks, savings and loans, or certain other financial institutions; insurance or surety businesses; state law enforcement or investigative units; state or local government agencies that otherwise require use of the employee’s or applicant’s credit history or credit report; and entities that are defined as debt collectors under federal or state statute; and
• Background investigations that do not include a credit history or report as permitted under the Fair Credit Reporting Act.

Employers that violate the Illinois Act could face damages, injunctive relief, and liability for attorneys’ fees and costs and could also face liability for any retaliatory conduct under the Act.

Along the same lines, legislation has been introduced in, among other states, Michigan and Ohio as well. In Michigan, House Bill 4528, also known as the Job Applicant Credit Privacy Act, would prohibit an employer from failing or refusing either to hire or recruit an individual because of the individual’s credit history and from inquiring about a job applicant’s or potential job applicant’s credit history. As with the Illinois Act, certain exceptions would apply for individuals who hold positions with identified types of companies including, for instance, banks or other financial institutions.

In Ohio, House Bill 340, which was introduced on October 28, 2009, would make it an unlawful discriminatory practice for an employer to use a person’s credit rating or score or consumer credit history as a factor in making decisions regarding that person’s employment. House Bill 340would allow a person to file a charge with the Ohio Civil Rights Commission and would provide similar penalties for violations.

As these examples show, a blanket policy of requiring credit reports for all employees or applicants could lead to possible discrimination claims under state or federal law or both.

The Federal Fair Credit Reporting Act
Moreover, even when employers are permitted to obtain applicant or employee credit reports, liability can still attach if the detailed procedures set forth in the federal Fair Credit Reporting Act (FCRA) are not followed. Specifically, the FCRA requires employers to inform applicants that a credit check will be performed and to obtain the applicants’ written permission in a stand-alone document that is not part of the employment application.

In addition, if an employer decides to take an adverse employment action against an employee or applicant based on the credit check, the employer must first give that individual a “pre-adverse action disclosure” that consists of a copy of the credit report and a written summary of rights under the FCRA before taking the adverse action. Presumably, this requirement is intended to allow an employee or applicant an opportunity to attempt to correct any inaccuracies on the report. Once the adverse action has been taken, the employer must provide the applicant or employee with an “adverse action notice.” This notice must alert the recipient that the employer, not the credit reporting agency, made the adverse decision; inform the recipient that he or she has a right to a free copy of the report; and provide the name, address and phone number of the agency that provided the credit report so that the recipient can dispute any inaccurate information.

Employers that fail to comply with the FCRA may face liability for actual damages, attorneys’ fees, costs and punitive damages. Criminal penalties are also possible for any employer that obtains a credit report under false pretenses.

Minimizing The Risks
Some of the ways you can minimize the risks of obtaining employee or applicant credit reports are by:

• Determining whether state laws govern your use of applicant/employee credit reports;
• Evaluating whether the benefits of obtaining credit reports for various positions outweigh the risks of doing so;
• Developing appropriate policies and procedures to govern procurement of credit reports; and
• Ensuring compliance.

The Rest @ HR Bits

 

HR Magazine Survey Companies on Back ground checks

Who Checks on What?
The December HR Magazine shared these statistics from a SHRM survey:

• Companies doing criminal background checks? 73% do them for all, 19% for some, 7% no
• Companies doing credit background checks? 13% do them for all, 47% for some, 40% no
• Companies conducting pre-employment drug testing? 55% do them for all, 17% for some 21% no

As with most SHRM surveys, most of the companies surveyed are very large.
Usually less than 15% are the size of our Member base. Nevertheless, where does your company fit in this? We’d advise you to do criminal background checks and drug tests on everybody, and credit background check on everybody you’re allowed to by law. This will eliminate exposing yourself to unnecessary risks.

 The EEOC is severely restricting credit background checks on a disparate impact basis.

The Rest @ HR That works

PointHR has been doing this for companies like yours for 17 years

I-9 Audits Doubled in 2010, New Federal Employment Compliance Inspection Center Opened

The Obama administration plans to intensify a crackdown on employers of illegal immigrants with the establishment of an audit office designed to bolster verification of company hiring records.

In an interview, John Morton, chief of U.S. Immigration and Customs Enforcement, a unit of the Department of Homeland Security, said the Employment Compliance Inspection Center would "address a need to conduct audits even of the largest employers with a very large number of employees." The office would be announced Thursday, he said.

.Mr. Morton said that the center would be staffed with specialists who will pore over the I-9 employee files collected from companies targeted for audits.

In the fiscal year that ended Sept. 30, 2010, ICE conducted audits of more than 2,740 companies, nearly twice as many as the previous year. The agency levied a record $7 million in civil fines on businesses that employed illegal workers.

Enforcement activity during the Bush administration focused on high-profile raids in which thousands of illegal immigrants were arrested and placed in deportation proceedings. Relatively few companies and their executives were prosecuted.

In contrast, the Obama administration has made employers the center of its immigration policy with "silent raids." Critics say the policy has penalized small employers while failing to target larger employers.

Mr. Morton said the new center would have the "express purpose" of providing support to regional immigration offices conducting large audits. "We wouldn't be limited by the size of a company," he said.

The audits, which have affected garment makers, fruit growers and meat packers, result in the firing of every illegal immigrant on a company's payroll. Companies say this has hurt them, especially as they can't attract American workers even during an economic downturn.

Last year, for example, Gebbers Farm, an agricultural concern in Brewster, Wash., dismissed an estimated 550 workers—about a quarter of the local population—after ICE told the company a number of its employees' hiring documents were suspect. The company declined to comment for this article.

Tom Roach, an immigration attorney in Pasco, Wash., said a client lost more than half of his workforce last year owing to an audit. "He had paid every nickel of taxes on them," he said. But the employees had presented social-security cards that the landscape company couldn't discern were fake, said Mr. Roach.

Small business owners, in particular, say they don't have the ability to police their workers. They also fear discrimination suits, as some companies have experienced, for demanding additional documents from workers whom they suspect are in the country illegally.

View Full Image

Associated Press

A U.S. immigration agent, second from left, led away three men during a search at a Poplar Bluff, Mo., restaurant last August.
.Angelo Paparelli, an immigration attorney in New York and southern California, said: "We need to take employers out of the business of performing government functions, like playing immigration police."

"Ultimately, it is in a company's best financial interest to proactively comply with the law now rather than to face potential fines or criminal prosecution for noncompliance in the future," an ICE spokeswoman said.

Mr. Morton said ICE was also seeking to expand a program enabling businesses to work with the federal government to ensure they are employing people authorized to work in the U.S. Called IMAGE, or ICE Mutual Agreement between Government and Employers, the voluntary program includes training and assessments to help a company guard against hiring illegal employees.

Mr. Morton will also announce Thursday that Tyson Foods, Inc., which employs 100,000 people and has fought immigration troubles in the past, has joined the program, agreeing to an audit of "a certain portion of existing records." The poultry processor, which says it has already taken steps to maintain a legal workforce, also agreed to establish an internal auditing process, Mr. Morton said.

Mr. Morton suggested Tyson could pave the way for other big companies to join the program. Tyson faced federal human-smuggling charges in a high-profile trial that resulted in acquittal in 2003.

"We...believe this partnership will enhance our ability to collaborate with government officials on immigration-related matters," said Tyson Chief Human Resources Officer Ken Kimbro.

"Tyson realized that employment of unauthorized workers posed a risk to their operations and stepped forward to manage that risk," says Mark Reed, a former immigration agent who runs Border Management Strategies, a consulting firm which has advised Tyson.

Since ICE initiated the IMAGE program in 2006, only 115 companies have signed on, with many reluctant to open their books to government scrutiny and to invest in training and new systems to bolster their employer-verification process, experts say.

About 11 million illegal immigrants live in the U.S., according to government estimates. Without them, experts say, such industries as construction, lodging and agriculture would be forced to radically change how they operate—sharply boosting costs for consumers or curtailing the services they provide.

Originally published 1/20/2011 By MIRIAM JORDAN

The Rest @ The Wall Street Journal

Pre Employment Checks - More than Public Record Database Searches

A number of annual reports, including BDO Stoy Hayward's Fraudtrack 4[1] and CIFAS's [2] (the UK's fraud prevention service) 'The Enemy Within' have showed a rising level of major discrepancies and embellishments on CVs over previous years. Such business fraud cost United Kingdom businesses $1.4 billion in 2005.[3].

• Almost half (48%) of organizations with fewer than 100 staff experienced problems with vetted employees.
• Thirty-nine percent of UK organizations have experienced a situation where their vetting procedures have allowed an employee to be hired who was later found to have lied or misrepresented themselves in their application.

Since the onset of the Financial crisis of 2007–2010, the level of fraud has almost doubled and some experts have predicted that it will escalate further. Annual research has also shown that the number of applicants lying on their applications has been increasing steadily since the summer of 2007 when the financial crisis of 2007–2010 began. As of August 2009, nearly one in 5 applicants have major lie or discrepancy on their application.

The marketLarger companies are more likely to outsource than their smaller counterparts – the average staff size of the companies who outsource is 3,313 compared to 2,162 for those who carry out in-house checks.

• Financial services firms had the highest proportion of respondents who outsource the service, with over a quarter( 26%) doing so, compared to an overall average of 16% who outsource vetting to a third party provider.

The construction and property industry showed the lowest level of outsourcing, with 89% of such firms in the sample carrying out checks in-house, making the overall average 16%. This can increase over the years.

Character Reference Check

Gaps in employment history

Identity and Address Verification - whether the applicant is who he or she claims to be. Generally includes verification of the candidate’s present and previous addresses. Can include a money laundering, identity and terrorist check and one to verify the validity of passports.

• Whether an applicant holds a directorship
• Credit History - bankruptcies
• Criminal History Report.

Regulation

The Financial Services Authority states in their Training & Competence guidance that regulated firms should have.

• Adequacy of procedures for taking into account knowledge and skills of potential recruits for the role
• Adequacy of procedures for obtaining sufficient information about previous activities and training
• Adequacy of procedures for ensuring that individuals have passed appropriate exams or have appropriate exemptions
• Adequacy of procedures for assessing competence of individuals for sales roles

The Financial Services Authority’s statutory objectives:

• Protecting consumers
• Maintaining market confidence
• Promoting public awareness
• Reducing financial crime

The FCRA (Fair Credit Reporting Act) is the most important regulation governing background screening.

There are a variety of important laws regulating the dissemination and legal use of this information. Most notably, the Fair Credit Reporting Act (FCRA) regulates the use of consumer reports (which it defines as information collected and reported by third party agencies) as it pertains to adverse decisions, notification to the applicant, and destruction and safekeeping of records.

If a consumer report is used as a factor in an adverse hiring decision, the applicant must be presented with a

• “pre-adverse action disclosure,”
• a copy of the FCRA summary of rights,
• a “notification of adverse action letter.”

Individuals are entitled to know the source of any information used against them including a credit reporting company. Individuals must also consent in order for the employer to obtain a credit report.

Florida Law

Florida House Bill H0775, passed in 1999, provides protection for employers from negligent hiring liabilities, provided they attempt to conduct certain screening procedures. Employers who follow these steps will be presumed not to have been negligent when hiring if a background check fails to reveal any records on an applicant. These steps are]:

• Ordering a Florida state criminal record check
• Taking reasonable efforts to contact an applicants past employers
• Asking the applicant on the application if they have been convicted of a crime, date of crime and penalty imposed
• Asking the applicant on the application if they were the defendant in a civil action for intentional tort
• A driving record must be ordered if it is relevant to the performed work
• The employer must interview the applicant

Types of checks

There are a variety of types of investigative searches that can be used by potential employers. Many commercial sites will offer specific searches to employers for a fee. Services like these will actually perform the checks, supply the company with adverse action letters, and ensure compliance throughout the process.

It is important to be selective about which pre-employment screening agency you use. A legitimate company will be happy to explain the process to you.

• Many employers choose to search the most common records such as criminal records, driving records, and education verification.
• Other searches such as sex offender registry, credential verification, skills assessment, reference checks, credit reports and Patriot Act searches are becoming increasingly common.
• Employers should consider the position in question when determining which types of searches to include, and should always use the same searches for every applicant being considered for one.

Reasons

1. They are frequently conducted to confirm information found on an employment application or résumé/curriculum vitae.
2. One study showed that half of all reference checks done on prospective employees differed between what the job applicant provided and what the source reported.
3. They may also be conducted as a way to further differentiate potential employees and pick the one the employer feels is best suited for the position.
4. As workplace violence becomes more of an issue and other serious concerns since the September 11, 2001 terrorist attacks, employers are becoming more concerned about the people they hire.
5. Employers have an obligation to make sure their work environment is safe for all employees and helps prevent other employment problems in the workplace.

In the United States, the Brady Bill requires criminal checks for those wishing to purchase handguns from licensed firearms dealers. Restricted firearms (like machine guns), suppressors, explosives or large quantities of precursor chemicals, and concealed weapons permits also require criminal checks.

Checks are also required for those working in positions with special security concerns, such as

• trucking,
• ports of entry
• airports (including airline transportation).

Other laws exist to prevent those who do not pass a criminal check from working in careers involving the elderly, disabled, or children.

Recently, many jobs are using pre-employment credit checks and the trend has appear to have grown since 2000 within the United States (Bird, M., 2010).

According to a survey in 2010, many individuals felt that employers should have the right and duty to check credit reports for all jobs, while another 28 percent felt that it depended on the potential employee's job responsibilities such as banking or accounting jobs.

Possible information included

The amount of information included on a background check depends to a large degree on the sensitivity of the reason for which it is conducted—e.g., somebody seeking employment at a minimum wage job would be subject to far fewer requirements than somebody applying to work for a law enforcement agency such as the FBI or jobs related to national security.

Criminal, arrest, incarceration, and sex offender records

There are several types of criminal record searches available to employers, some more accurate and up to date than others.

• These "third party" background checking agencies cannot guarantee the accuracy of their information, thus many of them have incomplete records or inaccurate records. The only way to conduct an accurate background check is to go directly through the state.
• Most times using the state of choice is much cheaper than using a "third party" agency.
• Many websites offer the "instant" background check, which will search a compilation of databases containing public information for a fee. These “instant” searches originate from a variety of sources, from statewide court and corrections records to law enforcement records which usually stem from county or metro law enforcement offices.
• There are also other database-type criminal searches, such as statewide repositories and the national crime file.
• A commonly used criminal search by employers who outsource is the county criminal search.

Citizenship, immigration, or legal working status

The hiring of illegal workers has become an issue for American businesses since the forming of the Department of Homeland Security and its Immigrations and Customs Enforcement(ICE) division. Many history making immigration raids over the past two years have forced employers to consider including legal working status as part of their background screening process.

All employers are required to keep government Form I-9 documents on all employees and some states mandate the use of the federal E-verify program to research the working status of Social Security numbers. With increased concern for right-to-work issues, many outsourcing companies are sprouting in the marketplace to help automate and store Form I-9 documentation. Some jobs are only available to citizens who are residents of that country due to security concerns.

Litigation records

Employers may want to identify potential employees who routinely file discrimination lawsuits. It has also been alleged that in the U.S., employers that do work for the government do not like to hire whistleblowers who have a history of filing qui tam suits.

Driving and vehicle records

Employers that routinely hire drivers or are in the transportation sector seek drivers with clean driving records—i.e., those without a history of accidents or traffic tickets. Department of Motor Vehicles and Department of Transportation records are searched to determine a qualified driver.

Drug tests

Drug tests are used for a variety of reasons—corporate ethics, measuring potential employee performance, and keeping workers' compensation premiums down.

Education records

These are used primarily to see if the potential employee had graduated from high school (or a GED) or received a college degree, graduate degree, or some other accredited university degree. There are reports of SAT scores being requested by employers as well.

Employment records

These usually range from simple verbal confirmations of past employment and timeframe to deeper, such as discussions about performance, activities and accomplishments, and relations with others.

Financial information

Credit scores, liens, civil judgments, bankruptcy, and tax information may be included in the report.

Licensing records

A government authority that has some oversight over professional conduct of its licensees will also maintain records regarding the licensee, such as personal information, education, complaints, investigations, and disciplinary actions.

Medical, Mental, and Physiological evaluation and records

These records are generally not available to consumer reporting agencies, background screening firms, or any other investigators without documented, written consent of the applicant, consumer or employee.

Military records

Although not as common today as it was in the past fifty years, employers frequently requested the specifics of one's military discharge.

Social Security Number

(or equivalent outside the US). A fraudulent SSN may be indicative of identity theft, insufficient citizenship, or concealment of a "past life". Background screening firms usually perform a Social Security trace to determine where the applicant or employee has lived.

Other interpersonal interviews

Employers may investigate past employment to verify position and salary information. More intensive checks can involve interviews with anybody that knew or previously knew the applicant—such as teachers, friends, coworkers, neighbors, and family members; however, extensive hearsay investigations in background checks can expose companies to lawsuits. Past employment and personal reference verifications are moving toward standardization with most companies in order to avoid expensive litigation.

Controversies

Drug tests and credit checks for employment are highly controversial practices. According to the Privacy Rights Clearinghouse, a project of the Utility Consumers' Action Network (UCAN): "While some people are not concerned about background investigations, others are uncomfortable with the idea of investigators poking around in their personal histories. In-depth checks could unearth information that is irrelevant, taken out of context, or just plain wrong. A further concern is that the report might include information that is illegal to use for hiring purposes or which comes from questionable sources."

In May 2002, allegedly improper post-hire checks conducted by Northwest Airlines were the subject of a civil lawsuit between Northwest and 10,000 of their mechanics. In the case of an arrest that did not lead to a conviction, employment checks can continue including the arrest record for up to seven years, per  sec. 605 of the Fair Credit Reporting Act:

Except as authorized under subsection (b) of this section, no consumer reporting agency may make any consumer report containing . . . Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.

Subsection (b) provides for an exception if the report is in connection with "the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more

Some proposals for decreasing potential harm to innocent applicants include:

• Furnishing the applicant with a copy of the report before it is given to the employer, so that any inaccuracies can be addressed beforehand; and
• Allowing only conviction (not arrest) records to be reported.

In Michigan, the system of criminal checks has been criticized in a recent case where a shooting suspect was able to pass an FBI check to purchase a shotgun although he had failed the check for a state handgun permit. According to the spokesman of the local police department,

... you could have a clear criminal history but still have contacts with law enforcement that would not rise to the level of an arrest or conviction [that can be used] to deny a permit whether or not those involved arrests that might show up on a criminal history.

The Brady Campaign to Prevent Gun Violence has criticized the federal policy, which denies constitutional rights based on a criminal check only if the subject has been accused of a crime.

Public records pay sites

Taking advantage of public records availability in the United States, a number of Web based companies began purchasing U.S. public records data and selling it online, primarily to assist the general public in locating people. Many of these sites advertise background research and provide employers and/or landlords with fee-based checks.

There has been a growing movement on the web to use advertising-based models to subsidize these checks. These companies display targeted ads next to the reports delivered to landlords or employers. Some of the reports provided by these pay sites are only expanded versions of a basic people search providing a 20 year history of addresses, phone numbers, marriages and divorces, businesses owned and property ownership. Usually, these sites will also provide a nationwide criminal report for an added charge.

The Rest @ Wikipedia



Point HR