Employee background screening is an unregulated industry with easy money and not a huge emphasis on compliance or on hiring quality people to do the screening.
The federal Fair Credit Reporting Act covers background screeners, but it hasn't been agressively enforced. The law says screeners must use "reasonable procedures" to ensure "maximum possible accuracy." It also requires employers to give a copy of background reports to rejected applicants. An applicant can dispute the information, but the Federal Trade Commission (FTC) has said employers must wait only five business days before hiring someone else, meaning that objections frequently become moot. Lately, the agency has focused more on identity theft than on screening, Rebecca Kuehn, assistant director for privacy and identity protection, says.
In 2005, it came to light that ChoicePoint, a company that conducts 10 million background checks annually and has about 20% of the U.S. market, had given identity thieves pretending to be small business clients seeking background checks access to people's addresses, Social Security numbers, and dates of birth. ChoicePoint agreed in 2006 to pay a $10 million civil penalty to the FTC and $5 million more to compensate 160,000 consumers whose information had been compromised.
Mistakes occur, and once a worker is flagged, it can be nearly impossible to work again. Under federal law, individuals are entitled to a copy of any background report compiled by a screening company for a minimal fee, generally $10 or less. Yet, ChoicePoint sells reports for $24.95 to as much as $75, depending on how customized they are.
In a 2004 study by the Society for Human Resource Management (SHRM), 96% of personnel executives said their companies conduct background checks on job candidates, up from 51% in 1996. Two-thirds of larger companies say they outsource screening, and many now vet current employees in addition to applicants.
Screening often goes far beyond the familiar checking of public criminal records. For $60 to $80 per applicant, ChoicePoint and its rivals assemble didital dossiers of educational degrees and credit histories as well as interviews with friends, past bosses, and colleagues. Call-center workers wearing headsets inquire about work habits, personal character, and drug or alcohol problems. Just by dint of their heft and permanence, the proprietary data caches they compile can seem authoritative, even though the information sometimes contains errors, innuendos, or outright falsehoods.
These inaccurate job applicant screenings may turnout to be fertile grounds for class-action suits against large employers who have permanently harmed candidates from finding employment.
Source: BusinessWeek, June 9, 2008