 |
|
This newsletter is sent to clients of Employment Screening Resources (ESR) as well as employers, Human Resources and Security professionals, and law firms who have requested information on pre-employment screening, safe hiring, the FCRA and legal compliance. Please note that ESR's statements about any legal matters are not given or intended as legal advice but only general industry information. For specific legal advice, employers should contact their attorney. If this was sent in error, you can be removed from this mailing by simply using the “remove" feature at the end of the newsletter and you will not receive any future newsletters. (Reading time: Less than 5 minutes) ESR Newsletter and Legal Update
1. Getting Back to Basics: The Basics of Credit Reports and Employment There is a great deal of misinformation on the Internet about credit reports and job hunting. However, job applicants have enough to worry about without having to deal with the stress of misperceptions about credit reports and how it may affect getting a job. One myth is that employers are trying to use credit reports as a way to deny employment. However, the background check - which includes the credit report - is run only AFTER an employer has gone through the time, cost, and effort to find the right candidate. An employer does not invest money in a background report just to find ways not to hire. When an employer initiates a background check, it is specifically because they are interested in hiring the applicant and they are conducting due diligence to make sure there is no reason not to hire. Another misconception is that applicants are losing job opportunities because of their credit score. It is an urban myth that employers receive a credit score. Employment credit reports simply do not contain a credit score since there is no evidence of a connection between a credit score and employment. Anyone who claims employers are using credit scores is sorely misinformed. A credit report will, however, include a credit history. A credit history shows the type of debts a consumer carries, such as credit cards, loans, car payments, and mortgage payments. It also shows how much credit a person has been given, how much they currently owe, and whether debts have been paid late or sent for collection. However, there is no score given where the credit report is for employment purposes. A credit report typically also contains:
A credit report for employment also does not contain a person's age, to guard against age discrimination. In addition, running an employment credit report does NOT affect a person's credit score, since a consumer is not applying for more credit. It is important for job applicants to understand that they have many rights when it comes to credit reports. All background checks by third parties are governed by the federal Fair Credit Reporting Act (FCRA). Although the word "credit" is used in that law, it is somewhat of a misnomer since a credit report is just one type of consumer report and background checks can include other information, such as criminal records. A background report is only obtained after the consumer has given consent and after a legally required disclosure on a standalone document has been given. If the employer intends to utilize the credit report (or any part of the background check) in any way not to hire, promote, retain, or reassign an applicant or employee, that person is entitled to a copy of his/her report, a pre-adverse action notice, as well as a statement of consumer rights. This must be done before any decision becomes final. The person also has the right to challenge the report. The consumer needs to be given sufficient time to review it and to object if he/she chooses. This is a fail-safe to help prevent background checks that are incomplete or incorrect from impacting a person unfairly. This right applies even if the employer had additional reasons not to hire the person or even if an applicant has excellent credit, but the employer has other concerns based upon the credit report, such as a reported high debt level. It may be that the debt level is overstated in the report and the applicant has the right to correct it. It is a best practice for employers to approach credit reports with caution when it comes to background checking, and to articulate a clear rationale as to why a credit report is related to a particular job. Employers should also be aware that, at times, the information in a credit report needs to be examined and evaluated more closely. For example, although credit bureaus make significant efforts to ensure accuracy, given the sheer amount of data processed, there is a possibility of errors in credit reports. A debt may be reported incorrectly for various reasons. For instance, a consumer may have refinanced their home, and the credit report has yet to reflect that the first loan has been paid off, giving the incorrect impression of a much higher debt level. The applicant could also be the victim of identify theft, which can also lead to incorrect data. Also, negative entries may well not be a valid predictor of job performance. If, say, there is an illness in the family and credit cards are used to pay medical bills, or if there has been a long period of unemployment, a consumer's credit report may show a large outstanding debt that may not affect suitability for employment. Or, a consumer may have a dispute about a debt, or a complication could have arisen due to dissolution of marriage. There may also be confusion on the credit report of financial information between family members with similar names. In addition, even if a bankruptcy is discovered, there are limitations on using a bankruptcy for employment decisions, since a person that goes through bankruptcy is entitled to a "fresh start." Another area of concern is discrimination. All hiring tools need to be a valid predictor of job performance, and be non-discriminatory. An overly broad use of credit reports could lead to claims of discrimination, if there is a disparate impact on protected groups. This is likely to be area of increased focus in the future. On the other hand, hiring a person who handles money or assets, makes fiduciary decisions, or has access to other people's private data without running a credit report could result in allegations of negligent hiring if a theft occurs and a credit report as part of a background check would have led to relevant information. Embezzlement, internal theft, and identity theft are significant problems in the United States. Every employer has an obligation of due diligence in hiring, and hiring someone who the employer reasonably should have known was unfit for the job can lead to lawsuits if the person were to, for example, use their position to commit identity theft or some other crime where a credit report would have put the employer on notice that there was a potential problem. If an applicant has $5,000 a month in revolving debt, for instance, but is applying for a $4,000 a month job, that could raise a red flag if the person will be put in charge of large amounts of cash. Embezzlement is considered a crime of motive, opportunity and means, and some employers feel that the debt-to-salary ratio provides important due diligence information. Some employers ask, "How can I put a person in charge of money matters when that person cannot seem to handle his or her own affairs?" It is a fair question, but can be more myth than fact. As noted earlier, there are many reasons why a credit history may have little or no relationship to employment. In fact, a study conducted by researchers at Eastern Kentucky University found that a credit report is not a good predictor of job performance or turnover. Elected officials have begun paying attention to complaints about the use of credit reports to make hiring decisions. Two states, Hawaii and Washington, have passed laws regulating the use of credit reports for employment, and more states are apparently looking at similar rules. In Washington State, under a 2007 law, an employer in Washington cannot obtain a credit report as part of a background check unless the information is substantially job-related and the employer's reasons for the use of such information are disclosed to the consumer in writing; or a credit report is required by law. A law restricting credit reports was passed in California in 2008, but it was vetoed by the governor. One prevalent urban myth is that any business can run a credit report on an applicant. The major credit bureaus have vastly tightened the rules on who can receive an employment credit report - all done to protect privacy and to counter identity theft. Background screening firms are required to determine whether an employer is entitled to receive credit reports on applicants and employees in accordance with a strict set of rules from the credit bureaus. Legitimate screening firms that are in compliance with the contractual obligations set forth by the credit bureaus are required to essentially do a background check on employers that want credit reports. This can include on-site inspections by third party agencies of the employer's premise, as well as checking bank and trade references, and other steps to ensure that the employer is legitimate, has a permissible purpose, and meets the guidelines set out by the credit bureaus. Certain businesses, such as home-based operations, or businesses that share space with prohibited users cannot qualify for credit reports. In addition, the new "Red Flag" rules require employers to have a written policy and procedure in place to deal with address discrepancies. See: Red Flags A final fact is that it has never been easier for a job applicant to get of copy of his or her own credit reports and that these reports are free. Federal law requires that each person can request and receive a copy from all three major credit bureaus once a year. There are many ads for a "cheap" credit report, but to get the free ones, a person should use this website: https://www.annualcreditreport.com/2. Getting Back to Basics: The Basics of Criminal Records Searches Searching for criminal records is much more complicated than it appears on the surface. Contrary to popular belief, there is no central database available to most private employers to instantly find a person's criminal record at one touch. The FBI database is only available to employers that are legally authorized to submit fingerprints, the readouts can be complex and there is even the possibility of errors in those records. With some 3200 counties in the US, screening firms have developed tools and techniques to identify potentially relevant counties to search, and nearly any county in America can be researched on site within 24-36 hours. The best practices for employers are to identify counties associated with the applicant and to search those counties by going to the courthouse. The way relevant counties are identified is first by using a tool called a social security trace that uses millions of record which show what addresses a social security number is related to. In addition, some employers also search counties where a person has worked or gone to school. Although such searches are very accurate, as with anything depending on human beings, there is still some small margin of error possible. Even assuming a record is found, a professional screening firm must determine if there are sufficient identifiers to associate the record to the applicant, and even if the criminal record belongs to the applicant, numerous states have laws that restrict what can be reported. Many states do not allow the use of arrest records, and even if a state allows it, there may be EEOC considerations. Even if a screening firm can report a conviction, the employer needs to consider whether the use of the record is discriminatory. An employer should not automatically reject an applicant with a criminal record, unless there is a business justification, taking into account such things as the nature and gravity of the act, the nature of the job and the age of the crime. Employers should be careful in the use of commercial databases that are advertised to search millions of records with instant results. Those 30 second searches are NOT a substitute for a real criminal check at a courthouse and probably would not demonstrate due diligence if used all by themselves. These databases are assembled from a hodgepodge of various sources that are willing to make their data public or to sell data, such as incarceration systems, state repositories or individual counties. These databases do not cover all states and may not be up-to-date, accurate or complete. Certain states do not provide date of birth, which is another reason a criminal record may not come up in a database. This can all lead to both false negative and false positive results from databases. A false positive means the person is branded a criminal who is not, and a false negative means a perosn with a criminal record is falsely "cleared." The commercially available instant criminal reports are best used as a research tool only by a professional screening firm to locate other places to search. Since they cover such a wide area, they can be very valuable in locating records that a county by county search can miss. However, these instant databases are also a potential source of litigation against employers and screening firms, with applicants filing lawsuits for being unfairly tarnished as criminals, or victims claiming that the employer did not exercise due diligence. Even if there is a database "hit," under the federal Fair Credit Reporting Act, the screening firm must either reconfirm the details at the actual courthouse to ensure accuracy, or send a contemporaneous notice to the applicant at the same time, so they know that they are the subject of negative public records. California is one state where any database "hit" must be re-confirmed at the courthouse and ESR believes it is a best practice to reconfirm all database hits at the courthouse to guard against unfairly labeling someone as a criminal where their case has been dismissed, or they are the victim of identity theft or just happen to have the same last name as a person with a criminal record. Some states offer access to the state police or central state court databases. Again, it takes a background screening expert to understand the value of such information on a state by state basis. There is also a difference between state court searches and federal courts. All of this is just the tip of the iceberg. For more details, see: http://www.esrcheck.com/services/services_detail.php 3. Getting Back to Basics: The Basics of Education Verifications Educational credentials can be an important part of an employer's decision making process in hiring. Educational achievement tells an employer a great deal about an applicant's ability, qualifications, and motivation. Many employers feel that educational qualifications are a critical factor in predicting success on the job. For many positions, education is a prerequisite in terms of subject matter knowledge or for obtaining the appropriate license for the position.
Surveys suggest that as many as 30% of all job applicants falsify information about their educational backgrounds. The falsifications can include outright fabrications such as making up degrees from legitimate schools the applicant never attended or valueless degrees from diploma mills. An applicant can also falsify his or her educational achievements based upon some semblance of fact, such as claiming degrees from schools the applicant actually attended but did not obtain the degree claimed. Typically a candidate turns their months or weeks of attendance into an AA degree, or claims a BA or an advanced degree even if they did not complete the course work or fulfill all graduation requirements.
Colleges and universities also have a vested interest in confirming educational accomplishments. Confirming an applicant received a degree from their school helps their graduates and promotes the reputation of their school. Conversely, uncovering the fraudulent use of the school's good name helps to preserve and protect the school's reputation. Background firms verify education in the U.S. in two ways. One way is to contact the school, usually through the registar's office. Before doing that, however, a competent background firm will first run the name of the school against various databases to ensure that the school is legitimate and accredited, and not a phony degree mill. A number of schools will require a written release or a fee, which can delay the verification. Delays can also occur because schools operate on an academic schedule, which can mean the administrative offices are closed during holidays and the summer months.
The other options available to screening firms are services that have contracts with schools to gather degree information from schools, thus acting as the schools' agents.
For some job applicants, getting a college diploma apparently no longer requires years of hard work, taking tests, paying tuition or even reading a book. Why bother going through the formalities when all a person needs is a credit card and a web browser in order to buy an authentic looking diploma that mimics real colleges, universities and even high schools across the U.S.? Go to any search engine and run keywords such as "Fake Diploma" and anyone can instantly "graduate" from nearly any school in America with a very handsome and authentic looking diploma suitable for hanging.
One such website advertises that it creates "very realistic diplomas/transcripts. These diplomas/ transcripts are extremely high quality printed on official parchment quality paper. You can show your employer and they will never doubt that you indeed attended college. You will not find better quality anywhere!!!"
Some of these sites "officially" caution that the diplomas and transcripts are intended for "Novelty and Entertainment Use Only." However, the fake documents you receive do not have a disclaimer written any place on them. When presented with a physical diploma or transcripts, employers should fax a copy to the school to confirm its authenticity. Most background firms can tell stories of faxing copies of degrees, supplied by the applicant, to high schools and colleges only to be told the degree is a fake.
Verifying high school education can present particular problems, due to the fact that there are so many high schools, and the fact they operate on an academic schedule. The most difficult degree to verify is typically a GED, since it requires additional time and effort to track down the office that has the information.
Adding to the challenge is that some degree mills and fake online schools have even created fake accreditation agencies to falsely vouch for the fake schools. In the U.S. schools are generally accredited by private organizations, that are recognized as legitimate accreditors by the Council for Higher Education Accreditation (CHEA) found at www.chea.org. The U.S. government, in response to these issues, has created a web site where employers can look up a school to determine if and how it is accredited. The web site is at: www.ope.ed.gov/accreditation/search.aspx which provides searches of schools by accreditation agency.
The problems with degree mills, however, should not be confused with legitimate vocational or trade schools. Each state has an agency in charge of certifying state-approved educational programs. If there are questions about the legitimacy of a vocational or trade school, then an employer should contact the appropriate authority in their state. There are numerous distance learning programs available on the internet as well. An employer should evaluate the program to determine if it has relevance to the job.
The bottom-line is that employers should not take educational accomplishments at face value without ensuring that the applicant actually has obtained the degree, and that the degree is from a legitimate educational institution.
ESR Articles (click for more info) The FCRA in 4 Easy Steps Criminal Records and Employment Applications 10 Safe Hiring Tools Negligent Hiring Please feel free to contact Jared Callahan at ESR at 415-898-0044 or jcallahan@esrcheck.com if you have any questions or comments about the matters in this newsletter. Please note that ESR's statements about any legal matters are not given or intended as legal advice. Employment Screening Resources (ESR) |
Safe Hiring Resources
Video clips used by permission of Kantola Productions The ESR Advantage
 The advantages of having ESR as your Safe Hiring Partner » The ESR Joint Commission Hospital Compliance Database » ESR Global Service — International background checks » Testimonials »» ESR Resources
|
|
|
