How the economy has molded the way companies now screen their workforces.
By Debbie Bolla
Ask any HR executive the cost of a bad hire and they will tell you it’s more than loss of money. You also must factor in wasted time, training, and company collateral. That makes the hiring process almost as important as the hiring decision itself.
Aberdeen Group’s recent report, Employee Screening Strategies, notes that companies using employee background screening are 43 percent more likely to improve hiring manager satisfaction. For years, companies have used background screening as an effective way to mitigate risk in the hiring process. In fact, according to HireRight’s 2011 Employment Screening Benchmarking Report, 96 percent of respondents currently conduct employee screening, or have plans to implement a program. But as with so many other things, the economic landscape has had its impact in the way organizations screen.
Being Compliant Counts
The level of regulation at the city, state, and federal level has increased dramatically in the current economy. The job environment and level of unemployment have forced the Equal Employment Opportunity Commission (EEOC) and other regulatory bodies to examine fair hiring practices.
Given that the unemployment level continues to hover around 9 percent, the EEOC is taking steps to review practices that would screen candidates out of the selection process—especially in cases when their prior history has no effect or correlation to their potential job performance.
“The EEOC has increased their examination of hiring practices, exposing employers to a greater risk of discrimination lawsuits,” explains Bill Tate, president of HR Plus, a division of AlliedBarton Security Services. “The EEOC is reviewing hiring decisions that automatically exclude candidates with poor credit or arrest records, even if they didn’t result in a conviction.”
Credit checks are receiving special scrutiny. Running credit reports for employment screening does not include a candidate’s credit score. Rather, it’s a case-by-case analysis, examining anything, such as fraudulent activity, that may have an effect on job performance. Since it often can be deemed subjective and discriminatory, Hawaii, Oregon, Washington, Illinois, Maryland, Connecticut, and California are among the states that have passed legislation to ban the use of employment credit reports, with nearly 20 other states considering legislation. Tate reports that a federal-level effort (HR #3149) is striving to do the same.
The use of criminal records is another hot-button issue. The “Ban the Box” law protects applicants by prohibiting employers from inquiring about criminal background (the “Box” in “Ban the Box” refers to the square next to the question inquiring about previous criminal activity). Massachusetts, New Mexico, Connecticut, and other states participate in this program.
“By virtue of legislation, employers need to make decisions based on merit and not personal history,” says Greg Dubecky, president of Corporate Screening Services. “Past work performance often predicts future work performance.”
Keeping compliant is a serious matter in order to avoid legal action. “Legislation can change so quickly that some HR directors don’t have the means to stay up to date with what’s going on, therefore putting the company at risk,” notes Brandon Phillips, president and CEO of Global HR Research. “Vendors stay abreast on changing legislation and we offer a communication program on changing trends.”
Other providers also help usher in the means of communication for the ever-changing landscape. In fact, HireRight takes to its blog to keep clients informed of updates in legislation.
Screening Contingent Labor
Workforce dynamics have changed appreciably since the start of the recession, with the contingent population growing at a steady rate. The Bureau of Labor Statistics reports that 26 percent of the share of the job recovery was made up by contingent workers. From HireRight’s 2011 Employment Screening Benchmarking Report, 76 percent of respondents are using contingent labor, a 10 percent increase from last year’s survey.
So as temporary workers become a more common solution to fill employment gaps, will companies increase screening them? In many cases these workers have the same access to systems and sensitive data as full-time employees. With that in mind, 27 percent of respondents to HireRight’s survey report that they screen contingent labor, and 48 percent of respondents plan to continue to screen or implement a program.
“More organizations from a risk mitigation perspective are recognizing that these people have access to just as much sensitive information as the full-time employee population,” notes Bill Glenn, vice president, marketing and alliances for TalentWise. “Organizations are getting smarter about the fact that they have to extend their screening program to that contingent labor pool.”
Contingent workers are often placed into a temporary role through a third-party vendor or staffing agency, and sometimes the responsibility of the background screen is placed on them or through an outsourced screening provider.
“There are very few standards when it comes to screening temporary workers,” says Dubecky. “How to screen contingent workers will be under review for a lot of companies in the coming months.”
“We’ve seen a gradual increase over time in the number of companies that have a formal program,” says Rob Pickell, senior vice president of customer solutions at HireRight. “But it is still one of the most significant areas that is open to risk.”
Social Media: Tread Lightly
Using social media for background checks still remains questionable. Organizations fear the legal repercussions if the actions taken are seen as discriminatory or improper.
“Most social media outlets have no fail-safe verification process, and some can be edited by anyone with access to the Internet,” notes Tate. “This puts companies at risk for violating FCRA [Fair Credit Reporting Act] regulations and EEOC guidelines.”
In fact since June of this year, social media is subject to the FCRA. So in executive background screening, Tate warns that organizations need to be careful in how they use social media, since it is in its infancy, and there is little legislation around it.
In terms of the hiring process, social media tends to be more popular for sourcing and recruiting. HireRight’s 2011 Employment Screening Benchmarking Report found that 56 percent use a form of social media to recruit, while only 11 percent use it in background checks.
Will this grow? Says Dubecky, “I think it all depends on whether or not legal determines if a policy is defensible, and whether or not that defense holds up in court. So like everything else in background screening, it has yet to be seen. I think social media screening, while it is interesting, those people that adopted a formal social media screening program are going to be considered early adopters for some time.”
The E-Verify Debate
Examining the eligibility of workers has been a strong trend from the beginning of the Obama administration. The amount of fines and the number of organizations being audited are on the rise. Worksite inspections more than doubled from 1,200 in 2008 to 2,750 in 2010, and fines rose from $675,000 to $7 million in the same time period.
“It is clear that organizations need to know who is making up their workforce, and they are not hiring ineligible workers,” says Glenn.
It has been reported that nearly 300,000 employers use E-Verify, an Internet-based system that businesses tap into to determine the eligibility of potential employees to work in the United States. “Again the economy comes into play,” says Dubecky. “We’ve got tens of millions of people who are out of jobs, and the fear is some of the jobs are going to individuals that aren’t legal workers in the U.S., and E-Verify is a way to mitigate that problem. “
But employment eligibility still remains a topic for debate. California Governor Jerry Brown recently signed the Employment Acceleration Act of 2011, which opposes E-Verify mandates and prohibits cities, counties, and special districts in California from requiring employers to use an electronic employment eligibility verification system (except as required by federal law or as a condition of receiving federal funding). The new law takes effect January 1, 2012.
“There continues to be a gray area on the balancing between an eligible workforce and denying workers in an area where we absolutely need them,” says Glenn. “I think it will continue that decisions enforcing E-Verify will be at the state level.”
With many organizations, even small and mid-sized firms, background screening and drug testing have become commonplace and a regular part of hiring and on-boarding new workers. With that, many employers have shifted the focus toward making their screening programs and practices better—more efficient, more accurate, more flexible, faster, and more appealing to both hiring professionals and applicants. The results shown in the HireRight 2011 Employment Screening Benchmarking Report point to an array of best practices, which can help organizations achieve these goals.
• Commit to an effective screening program. With budgets tight and employers facing the constant challenge of finding and retaining talent, a screening program should be designed to meet organizational objectives in mitigating risk and using the latest technology for speed, efficiency, and a high-quality experience. Every new hire represents not only a possible liability to an organization—in terms of risks of workplace violence, employee theft, and turnover—but also a potential advantage.
• Establish a consistent written standard. Maintaining a clear policy as to who will be checked, what information will be gathered, how it will be collected, and how it will be used helps protect the organization against charges of discrimination. It can also help ensure that key issues of organizational compliance and security are being met.
• Do not settle for criminal checks only. In tight economies, employers may feel that they can only afford to protect against the worst offenses, but applicants often lie about education, employment, and other areas of their background. Organizations should continue to ask the questions they need answered to assure a high-quality hire.
• Be careful of a one-size-fits-all screening program. An approach that applies the same screening criteria to all candidates for all positions may be inappropriate, non-compliant, and could result in increased legal liability. Federal, state, and even local laws and regulations prohibit employers from discriminating against candidates based on race, sex, age, disability, religion, national origin, and other protected characteristics. If the use of particular screening criteria disproportionately excludes individuals of a certain protected category, the criteria could be found to be discriminatory under these laws unless it is “job-related and consistent with business necessity” for the specific position for which a candidate is being considered.
• Have a well-considered social media policy for both sourcing and screening. Employers must walk a fine line between assuring non-discriminatory hiring (which may be questioned if social media is used for screening) and negligent hiring if clearly available information was overlooked.
• Understand and comply with legal responsibilities. Employers must be familiar with their legal responsibilities with regard to screening and testing and ensure that they meet those requirements, particularly with regard to consent, notice, and adverse actions.
• Reassess programs regularly. Laws and regulations regarding screening are constantly changing and technology is moving ahead so rapidly that an “occasional” reassessment may not be sufficient to keep employers compliant and confident in their current policies and procedures.