Checks and Balances

Errors can be a frequent occurrence in background checks, according to this March 16, 2005 article by our staffing columnist.

Wednesday, January 25, 2006
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Most employers perform background checks on new employees, and if statistics are correct, about 25 percent of them receive bad information.

Do a Web search on the topic and stories abound of incorrect credit reports, identity confusion and inaccurate criminal-history information. There's the man applying for a mortgage who's told that he's dead or the couple who doggedly try to correct bad credit information -- and are rebuffed by the credit-reporting bureau.

Of more interest to employers is the tale of the employee who loses his job because a background check comes back with wrong information. Once he finally convinces his employers that identity confusion was to blame, he is reinstated, but believing his reputation is fatally tarnished, later files a lawsuit.

The case has not yet come to fruition, but the incident can serve as a cautionary tale.

"To my knowledge," says Scott Smith, vice president of client services for American Background, an employment-screening company in Winchester, Va., "there aren't any industrywide metrics that are going to tell you how many situations companies get into because they are using bad information. I will tell you there is a lot of bad information out there."

According to a survey released last year by Washington-based consumer group, U.S. PIRG, one in four (25 percent) credit reports contain errors serious enough to cause consumers to be denied credit, loans or a job.

"The big credit bureaus and big business tolerate big mistakes in credit reports," says Ed Mierzwinski, U.S. PIRG Consumer Program Director. "But those mistakes ruin the financial reputations of hardworking Americans."

Credit checks by employers are not as prevalent as criminal-background checks, according to a 2003 survey by the Society for Human Resource Management. That survey found that about eight in 10 employers (82 percent) investigate the backgrounds of potential employees, with such investigations broken down as follows: reference checks and criminal-background checks (each at 80 percent), previous work history (79 percent), education (55 percent), motor-vehicle record (44 percent), credit check (35 percent) and military-discharge information (21 percent).

In this security-conscious world, employers have increased their propensity to do background checks. So, too, has the number of databases offering credit and criminal-background information increased. Be warned, however, such Internet databases are held in contempt by many reputable background screeners.

Such online sources "are full of holes," says Les Rosen, an attorney and founder of Novato, Calif.-based Employment Screening Resources. "The real area where employers will find a high error rate is where they go online and use one of these do-it-yourself services."

Such databases are compilations of information from a variety of sources, he says, and they are not complete or up-to-date.

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Background-screening companies always double-check negative information on targets of searches, Rosen says. And even if the firm gets its information directly from courthouse records -- which is the most dependable source of information -- errors can occur.

One job candidate investigated by Rosen's firm was the apparent perpetrator of a "moderately serious" sex-related crime. It turned out, however, that the candidate was the victim of identity theft. He did not fit the physical description of the criminal although it was his name and identity information used during the arrest.

Because there is always the chance of a mix-up, employers need to protect themselves by rigorously complying with the "adverse action" processes outlined in the Fair Credit Reporting Act, says Richard Seldon, president of Sterling Testing Systems, a New York-based company that offers pre-employment services.

That process requires companies to make sure the job candidate -- or target of the search -- be notified of the report findings and be given an opportunity to correct the information contained in the report. Companies should not take any action based on a report without taking these steps, he warns.

"There is a process and the process is in place to protect the individual because there is no perfect system," Seldon says. "The major difficulty for a lot of companies . . . [is] they don't follow the processes in place. If they did, they wouldn't get in hot water."

This column originally appeared in Human Resource Executive®  magazine on March 16, 2005.

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