The Basics of Pre-employment Screening and Safe Hiring – What Every Employer and HR Professional Needs to Know

By Attorney Lester S. Rosen, Founder and CEO of Employment Screening Resources® (ESR)

It has become an accepted adage that a company is only as good as its people. Identifying and hiring the right people is a prerequisite to success. Conversely, hiring the wrong person can lead to a legal and financial nightmare. Hiring someone that is unqualified, dishonest, unfit, or even dangerous can be a disaster. Just one bad hire can not only cost customers, but can lead to lawsuits, and a variety of disruptions.

There are a great many tools, solutions, and techniques to help employers identify, recruit, attract, hire, and retain outstanding employees. However, even after going through the whole hiring process, there is one more step to take – a firm needs to make sure there is no reason NOT to hire that person. That is why the vast majority of U.S. employers utilize pre-employment background checks. In other words, a background check does not tell an employer who to hire but is the final due diligence tool to make sure employers are not inviting a lawsuit or disaster waiting to happen.

The purpose of this article is to provide executives, hiring managers, and Human Resources, Staffing, and Security professionals a basic high-level introduction to background screening and how it fits into the entire hiring picture. It is not intended to go into the details of “how the sausage is made.” Readers wanting more details can invited to review my book, “The Safe Hiring Manual,” which has more than 800 pages of details.

This article will review:

1.     What is pre-employment screening?

2.     Why do employers perform pre-employment screening?

3.     When is pre-employment screening done?

4.     What is in a background check report?

5.     How is pre-employment screening regulated?

6.     What is the process for a background check report?

7.     What about privacy, information security, and accuracy?

8.     What about criminal records, are they fair to applicants, and should people get a second chance?

9.     What rights do job applicants have in the screening process?

10. What steps should an employer take to promote due diligence before a background check?

11. How does an employer select a screening firm?

12. What about international background checks?

13. Where can I get more information about background screening?

1.     What is pre-employment screening?

Quite simply, pre-employment screening is a service provided by a background screening company that generally occurs before hiring, that employers use to ensure there is no reason NOT to hire the candidate. It is a process of researching further information on a candidate’s credentials and potential risk factors. The pre-employment screening process is meant to reasonably discover if an applicant is truly qualified for the particular job by looking at factors such as:

·        Do they have the past employment experience, education, or credentials claimed?

·        Are there other factors such as an unsuitable criminal record that may pose an unacceptable risk to the employer, other employees, the public, or those using the employer’s services?

Background checks also include any screening done for promotion, retention, or re-assignment. 

It is also important to understand that a pre-screening program is aimed at how a person has performed in the public aspect of their lives. Items such as criminal records or previous job performance reflect how a person behaves towards others or discharged his/her obligations or responsibilities in a public setting.   

It is also important to understand what screening is NOT:

·        A screening firm is NOT the employment police and does NOT make employment decisions or render any opinions whatsoever. A screening firm provides information in a heavily regulated legal environment. The screening firm generally has limited if any contact with the applicant and has no involvement in writing the job description, recruiting, interviewing, or deciding whether or not to hire.

·        A screening firm does NOT provide legal advice.

·        A screening firm does not invade an applicant’s privacy since. First, all screening is done with the applicant’s express consent and the applicant is given a disclosure about the process. In addition, a background check report is looking at what a person has done in their public life. Information, for example, is obtained from schools, past employers, or public records. Applicants are easily able to obtain a copy of their reports and must be told if the report was used adversely against them and given the opportunity to object to anything in the report, they believe is incomplete or incorrect.  Screening is NOT an invasion of privacy, a sign of mistrust, or an act of “Big Brother.”

A screening firm is referred to as a Consumer Reporting Agency or CRA. That is the term used in the Fair Credit Reporting Act (FCRA), the federal law that regulates background screening.  

2.     Why do employers perform pre-employment screening?

Employers want to hire the best applicant for the job, avoid bad hires, and to limit turnover. There are four major reasons why employers utilize employment screening as a final step in hiring:

·        Yields More Factual Information: Although intuition can play an important role in hiring, basing a decision on solid information is more reliable and safer. Effective screening obtains factual information about candidates to supplement interview impressions. It is also a valuable tool for judging the accuracy of a candidate’s resume. Facts limit uncertainty in the hiring process. As the old saying goes, an employer should “trust, but verify.”

·        Provides Deterrence:  Making it clear that screening is part of the hiring process can deter potentially problematic applicants and discourage applicants with something to hide. An applicant with a serious criminal history that is inconsistent with the needs of the job or falsified information on his or her resume is less likely to apply at a firm that announces pre-employment background checks are part of the hiring process. Do not become the employer of choice for people with problems when simply having a screening program can deter those problem applicants. However, as discussed below, an employer should be mindful of the proper and non-discriminatory use of criminal records throughout the hiring process. Studies show that in certain industries, employers have had great results by hiring former offenders.

·        Encourages Honesty: The goal of a safe hiring program is not to find “perfect” candidates. Many jobseekers with blemished records may still be well-suited for employment. Few employers enjoy the luxury of choosing only from a pool of perfect candidates. However, employers need to be fully informed when making hiring decisions. Doing background checks encourages applicants to be especially forthcoming in their interviews. Making it clear that background checks are part of the hiring process is a strong motivation for applicants to be open, honest, and truthful.

·        Promotes Due Diligence: An employer who hires someone they either knew – or reasonably should have known – was dangerous, dishonest, unqualified, or dangerous can be sued for negligent hiring, negligent reception, or negligent promotion. Implementing a screening program helps employers practice due diligence in their hiring. Screening is a powerful defense in the event of a negligent hiring lawsuit and understanding how due diligence is associated with liability for negligent hiring is critical for any employer. This does NOT mean that anyone with a criminal record is eliminated and that in fact would be against the law. It simply men's the employer made an informed decision based upon relevant facts. If a bad hire results in legal action, then an employer must show that it utilized appropriate measures of due diligence: 

o  Firms that do not perform due diligence are sitting ducks for litigation, including attorneys’ fees and big damage awards. Employers who implement and show due diligence measures can benefit from powerful legal protection. Fortunately for these employers, the cost of exercising due diligence through screening is very modest especially compared to the risk of hiring blind and the and risk of litigation and attorney fees stemming from a single bad hiring decision. As another old saying goes, it is a matter of “paying now or paying later.”

o  In addition, a screening program protects employers when bad hires slip through. Despite an employer’s best efforts, there is always the possibility someone will be hired which may result in a lawsuit. Employers who can demonstrate to a jury that due diligence was maintained as part of their hiring process will have a powerful defense against a lawsuit.  

3.     When is pre-employment screening done?

Typically, an employer does a pre-employment background check at or after the interview. In some states that have passed Fair Chance Hiring laws, as discussed below, there is a requirement that it occurs after the job offer. Regardless, employers are screening only finalists that they want to hire and are generally assuming that the background check will come back clear.

4.     What is in a background check report?

There are numerous tools available to an employer. Which tools an employer finds useful often depends on the risk associated with the hire or, in some cases, there are rules imposed by various laws. Items checked may include, for example, verifying past employment, including dates and title, as well as past education or licenses and credentials. Many employers will check driving records as well. Another type of search is based upon an applicant’s social security number that helps to confirm identity as well as locations where the applicant has lived or worked in the past. That information is needed because employers will often do past criminal searches. More on that later.  

There are two types of reports that employers should approach with caution – credit reports and social media searches. Although in some situations there may be helpful information, employers need to be careful before requesting those searches since there can be legal landmines that can get an employer in hot water. 

When it comes to criminal records, employers need to understand that there are no private national criminal databases of information available to employers. There is the Federal Bureau of Investigation (FBI) database, but only certain employers (banks, for example) can access that information and there are issues as to completeness. For private employers, there are commercial databases composed of all data that private firms can obtain from various sources, but it is not always reliable because of issues concerning the accuracy and timeliness of the underlying information. In some states, database information can have a high degree of accuracy, but in most states, databases are very hit or miss. The problem is that a database search can contain both false positives, where a person misidentified as an offender or the underlying offense is not reportable, or a false negative, where an offense is missed completely. Although these databases can help provide additional places to search, a background screening firm must still determine the most accurate way to search any county.

Typically, criminal records are searched at the county level. There are some 10,000 courthouses in the United States spread among approximately 3,200 counties. Some counties can be searched through electronic means, but in order to ensure accuracy, the background firm must ensure that the electronic search is the functional equivalent of sending a researcher to the courthouse. As discussed below, criminal records are complex due to a variety of laws designed to ensure accuracy, limit the use of certain criminal information, provide former offenders a second chance and protect against discrimination.  

5.     How is pre-employment screening regulated?

Background checks are subject to intense legal scrutiny, through legislation, regulation, and litigation. Legal compliance is one of the most critical issues for employers. The walkaway point is that background checks are important, but it is equally important to do them right. There are legal considerations on the federal and state level, and often times even by cities and counties. 

An example of legislation, and probably the most critical law, is the federal Fair Credit Reporting Act (FCRA) that regulates the duties of screening firms and employers, as well as providing numerous rights to job applicants (usually including independent contractors as well). For example, a background check can only be run if there is a permissible purpose such as employment. Even then, there must not only be explicit consent, and the law requires a “standalone” disclosure form. There has been a great deal of litigation, including large class-action lawsuits, about what should be in a disclosure form, and it is the legal duty of an employer to make sure the forms are correct. Even though a screening firm may provide examples, the employer has the ultimate responsibility to ensure the forms are correct. In addition, the FCRA requires that if a background check report is used in whole or in part to deny employment or to take any “adverse action” against an applicant, the applicant has a right to both a pre-and post-adverse action later advising them of their rights, the right to receive a copy of the report along with a statement of rights written by a federal agency, and the opportunity to demand a re-investigation. The FCRA also has a number of rules for screening firms, including the requirement that a screening firm utilizes “reasonable procedures for maximum possible accuracy” and, in the case of a criminal record, to take special precautions to ensure it is complete and up to date.

In addition to the federal FCRA, numerous states have their own version of the FCRA as well. Although state FCRA-type laws largely track the federal law, there are a number of specific state differences. In addition, numerous states have their own laws that control matters such as the use of social media passwords, credit reports, what criminal records can be used and how, and prohibitions on asking about past salary in order to combat gender pay discrimination. 

An example of regulation is the U.S. Equal Employment Opportunity Commission (EEOC) guidance of the use of criminal regard issued in 2012 that updated previous guidance, which is discussed below.

An example of litigation is the numerous class action lawsuits filed against employers for violations of the FCRA, many of them resulting in millions of dollars in payments even though the harm was minimal to non-existent. This another reason why legal compliance is critical. 

6.     What is the process for a background check report?

After analyzing an employer’s needs, screening profiles are developed that depend upon the risk involved. Some firms screen everyone the same or other firms will do increased screening for more sensitive hires. In addition, the FCRA requires that an employer certifies to the background screening firm that it will use the information for a permissible purpose (in this case, employment-related) and will not use it to discriminate. Typically, screening is initiated by an employer requesting the background firm send out an email to the applicant. The email invite typically gives the applicant all of his or her rights, provides for an electronic signature, and a way to collect applicant data such as past addresses, their social security number, and past schools and employers if applicable. The employer can start the process through a background firm’s online portal or sometimes through an integration between the background firm and an Applicant Tracking System (ATS). 

After getting the consent and information from the applicant, the screening firm gets to work, performing each search. Depending on the complexity of the request and the types of searches involved, information can be returned immediately, in hours or up to three days. When there are delays, they are usually caused by matters out of the background screening firm’s control, such as courts that need to retrieve a file so the screening firm can confirm identifiers and the details of the offense, or because employers will not call back or schools are closed. International screening inherently delays a report due to the complexities involved in getting informatics from outside of the U.S. When the report is complete, the employer is notified, and the report is available securely online. If something negative is reported, such as information that is derogatory or shows some serious discrepancy or the report is used in any way to not hire, promote or retain someone, then the pre-and post-adverse action rules go into effect. 

7.     What about privacy, information security, and accuracy?

With the well-publicized data breaches that have occurred and a flurry of new privacy legislation, it is imperative that an employer protect itself when it comes to the use of any third-party service provider that has access to Personally Identifiable Information (PII) belonging to a firm’s employees. A background screening firm must understand and comply with strict data and privacy protection standards.

At a minimum, a background screening firm needs to be in compliance with the data and privacy protection provisions of the screening industry accreditation rules provided by the Professional Background Screening Association (PBSA), as mentioned below. However, that is only a starting point.

The gold standard for privacy and data protection is a SSAE 18 SOC 2 Type II Report that is conducted annually and confirms a screening firm meets high standards set by the American Institute of Certified Public Accountants (AICPA) for protecting the privacy, security, and confidentiality of consumer information used in the background check process. The SOC 2 audits are conducted using stringent criteria established by the AICPA. These internationally recognized standards address technological advances and associated risks, including cloud services not covered in the now-retired SAS 70 standards. Financial institutions require it and publicly traded larger private companies rely upon a SOC 2 report before selecting an outsourced service organization.

In addition to rigorous international privacy laws discussed below, individual states are also passing rigorous privacy laws. California, for example, has passed the California Consumer Privacy Act (CCPA) that took effect January 1, 2020. Although that particular state law does not apply to activities conducted by a consumer reporting agency subject to the federal Fair Credit Reporting Act (FCRA), it underscores how critical it is to work with a screening firm that understands and complies with privacy and data protection laws.

Another important consideration is international privacy. Some firms offshore the screening process to foreign Business Process Offices, which may create privacy issues. There also are a host of international privacy laws, such as the General Data Protection Regulation (GDPR) of the European Union (EU) that took effect on May 25, 2018. The GDPR is a regulation by which the European Parliament, the Council of the European Union, and the European Commission strengthened and unified data protection for all individuals within the European Union.

8.     What about criminal records, are they fair to applicants, and should people get a second chance?

It has been estimated that as many as 70 million Americans have some sort of criminal record, and “recidivism” – the tendency for ex-offenders to reoffend after release and go back into custody – is a major national problem. Many elected officials and second chance advocates realized that the best way to break the cycle of recidivism was for people to have a job in order to become a tax-paying and law-abiding citizen. Otherwise, as a society, we are going to spend more taxpayer dollars on prisons and jails than schools and hospitals.

Not only is employment the most effective tool to break the cycle of recidivism but ex-offenders can be an overlooked pool of labor, and from studies, we know they are a very hardworking and loyal workforce with low turnover.

The first effort was a movement called “Ban the Box.” The box referred to a part of a typical employment application (either written or online) where a person was asked at the beginning of the hiring process if they had a criminal record and a box or place to check yes or no.

The idea was that having to reveal a criminal record on the initial application could cause an employer to assume the risk was too high. Studies show there is a built-in bias against hiring applicants with criminal records. The criminal record became an early knockout punch where the application was disregarded before the person even had the chance to show what he or she could do or offer as a person. Also, ex-offenders would be chilled or deterred from applying in the first place because they either had to tell the truth and risk being rejected immediately or lie.

The Ban the Box movement was intended to give ex-offenders a chance to show what they could contribute as an individual and be evaluated on their merits, without being pre-judged as an undesirable applicant due to their status as an ex-offender. After all the root of the word prejudice is pre-judgment, based on judging a person on some status as opposed to who he or she is as an individual or what they can do. The idea was that a relevant background check could be run later in the process after an applicant was able to initially compete on an even playing field. In other words, a criminal record should not serve as an "early knock-out" punch before the candidate even has the opportunity to demonstrate their skills and abilities.

As of 2020, some 36 states and more than 150 cities and counties have some sort of Ban the Box law, with more laws being passed monthly. Some laws have morphed into more comprehensive Fair Chance Hiring laws that go beyond the initial application and impact such things as which criminal records can be considered, when a background check can be run (e.g. post-offer only), what type of notices a candidate receives, and other protections and procedures.

The federal Equal Employment Opportunities Commission (EEOC) has made it clear that the use of criminal records to automatically reject someone from employment can be a form of discrimination based on disparate impact, meaning a criminal record may seem neutral on its face but, in the real world, results in certain groups being systematically denied employment opportunities.

The EEOC revised guidance issued in 2012 first recommended that employers Ban the Box. Second, employers should only ask about a criminal record at or after the interview. Third, if there is a criminal record, employers should do an initial targeted screen to evaluate the risk posed by taking into account the nature and gravity of the crime, the nature of the job, and the age of the offense. For example, a person who was convicted of a theft crime may do perfectly well on a construction site, but be less than ideal taking care of the finances of an older person. In addition, the older the crime, the less relevant it arguably becomes.

The EEOC also cautioned that an arrest is not a conviction and should be handled carefully and, in fact, many states prohibit the consideration of an arrest only. If an employer decides not to hire someone based on a criminal record, the final act and the process all employers need to make sure they are doing is to provide an individualized assessment.

That means before denying a job opportunity due to a criminal record, the applicant is given the chance to tell you either facts about the crime or themselves that would bear upon the job, so that they are being evaluated as an individual as opposed to being a person with a criminal record. The concept of “Individualized Assessment,” is also one of the most critical parts of Fair Chance laws.

Also important is the accuracy of criminal records. The records must not only be complete and up to date as of the time of the report, but a background screening firm must confirm there are sufficient identifiers to ensure the record belongs to the applicant. In addition, there are numerous laws that impact what information an employer may use. For example, employers typically do not use arrest reports (where no conviction resulted) or matters that were set aside such as expungements or diversions. 

Employers should make sure you are working with your screening firm, HR advisor, and corporate counsel to ensure you are in compliance with these rules on the use of criminal records on the local, state, and national level.

9.     What rights do job applicants have in the screening process?

Job applicants have numerous protections built into the screening process. A background check report cannot even be obtained in the first place unless an applicant consents and is given their rights. If the report contains anything negative or derogatory or is used against them, they have the right for pre-and post-adverse action procedures under the FCRA as outlined earlier. If applicants believe a report is incorrect or incomplete, they are entitled to a re-investigation. As for criminal records, there are numerous Ban the Fox and Fair Chance hiring laws, as well as protections against discrimination by the EEOC.  Applicants also have numerous privacy rights. 

10. What steps should an employer take to promote due diligence before a background check?

One key point for an employer is to make certain that the entire hiring process is not only legally compliant but aimed at promoting due diligence in hiring from the beginning of the process. Keep in mind that background checks are generally used as the final tool in the process AFTER a hiring decision has been made. After all, an employer only pays to background check finalists. The biggest bang for an organization’s buck is to ensure that due diligence is factored in during all stages of the hiring process. In my book, “The Safe Hiring Manual,” I go into the details of best hiring practices, centered around the application process, the interview process, and the reference checking process. By utilizing best practices before the background check, employers can substantially minimize any chance that an applicant who is unqualified, unfit, dishonest, or dangerous will slip through the cracks.

11. How does an employer select a screening firm?

One assumption an employer may make is that all background screening firms are alike and that it is a commodity industry. Nothing could be further from reality. That would be similar to saying all lawyers and law firms are alike when, in fact, there can be a wide variety of expertise and talent. 

For background screening, there are dozens of different ways that the “sausage can be made.” Take criminal records, for example. At first glance, an employer may be under the impression every firm uses the same techniques. Employment Screening Resources® (ESR) has written a white paper on ways a Consumer Reporting Agency (CRA) can take short cuts that could leave an employer vulnerable. See: https://www.esrcheck.com/wordpress/2017/05/09/employment-screening-resources-releases-whitepaper-showing-how-shortcuts-can-lead-to-inaccurate-criminal-records/.

Without knowing how to look under the hood, an employer may be handicapped in determining if they are getting first-class service, or just paying first-class and getting coach.

Unfortunately, there can be wide variations in the competency and quality of background screening firms since there is essentially very little barrier to entry into the screening industry and limited government regulation, licensing, or oversight. An individual with serious criminal records or a history of fraud can obtain commercially available software and can present themselves online as a legitimate screening firm. Competent and legally compliant background screening is complex and has numerous moving parts. It is challenging to determine if a firm is competent just by reviewing their website.

To determine if a third party CRA is a good selection for a client, a business should consider a requirement that a CRA be accredited under a program run by the Professional Background Screening Association (PBSA) that requires that a CRA demonstrate that it adheres to best practices in six key areas and requires an independent onsite audit by a professional auditor. The standards have detailed auditing criteria, and firms must go through an onsite audit by a professional third-party auditor. The accreditation is valid for five (5) years, and a firm undergoes an interim audit after three (3) years. Over 100 firms in the U.S. are accredited.

An employer is also well advised to look at factors beyond accreditation to a nationally accepted privacy certification such as a SOC 2® or equivalent. More information is at: https://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/serviceorganization-smanagement.html.

Although there are numerous criteria that can be applied to determine if a third party CRA is qualified, an evaluation can likely be accomplished by asking representative questions. Employment Screening Resources® (ESR) has two publications that an employer can review in order to perform an assessment. See: https://www.esrcheck.com/file/ESR-25-Question-Due-Diligence-Checkup.pdf and https://www.esrcheck.com/file/50-Questions-to-Ask-a-Background-Screening-Firm.pdf.

One mistake employers need to avoid is selecting a provider based upon price. As the old saying goes, you usually get what you pay for. An employer needs to make sure they are looking at total value, not just price. Many employers have found out the hard way that being a price shopper is a sure way to get sued, or make bad hires.

Another factor to consider is whether a background firm performs its services off-shore. Because of the complexity of screening, many employers prefer that the work be done in the United States.  Offshoring may make screening more profitable for the screening firm, but may not further the employer's objectives.

12. What about international background checks?

When it comes to international background checks, a great deal of expertise is required in order to ensure that the most accurate and appropriate source of data is utilized for each country and all privacy laws are followed. A screening firm also needs expertise in how to conduct international employment and education verifications as well as other international tools. There are well over 200 political entities around the globe, and each one is an adventure. The key is to inquire if your organization is using a background screening firm with firsthand knowledge and abilities in international screening.

13. Where can I get more information about background screening?

For more information about pre-employment background screening, visit the Professional Background Screening Association (PBSA) website at https://thepbsa.org/, the Employment Screening Resources® (ESR) website at https://www.esrcheck.com/, and “The Safe Hiring Manual” web page at https://www.esrcheck.com/Tools-Resources/Safe-Hiring-Manual/. 

There are additional sources of information that may help employers. For example, the U.S. Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) prepared a summary of the Fair Credit Reporting Act (FCRA) and the use of criminal records. See: https://www.eeoc.gov/laws/guidance/background-checks-what-employers-need-know.

Another useful source is a best practice document for the use of criminal records that can be found at: https://lawyerscommittee.org/best-practice-standards-the-proper-use-of-criminal-records-in-hiring/.