BUSINESS.COM GUIDE TO BACKGROUND CHECKS

CONTENTSOVERVIEW OF BACKGROUND CHECKS 3

TRENDS 6

FEATURES 8

KNOW THE LAW 11

STEP BY STEP 13

CALCULATING COSTS 14

PURCHASING TIPS 15

COMPARISON CHECKLIST 16

GLOSSARY OF TERMS 18

3

WHYThe number of background checks conducted in the United States has exploded over the past decade. Background checks are most often used for pre-employment screening of job candidates; but they’re increasingly being used for a variety of purposes, including verifying creditworthiness for a car or home loan, or other significant purchases. But is checking into people’s backgrounds really necessary?

The short answer is yes! Studies show that more than half of job applicants lie on their resumes. And, more than 50% of employers report that attracting qualified

employees is the most significant challenge their organizations face. Pre-employment screening helps pinpoint those who are untrustworthy, while boosting the employment opportunities of those who screen well.

OVERVIEW OF BACKGROUND CHECKS

“MORE THAN 50% OF EMPLOYERS REPORT THAT ATTRACTING QUALIFIED EMPLOYEES IS THE MOST SIGNIFICANT CHALLENGE THEIR ORGANIZATIONS FACE.”

4

WHYBackground checks have become a routine part of the employment process, and in many cases, these checks are required by law. Such checks are performed on members of the Armed Forces; people who need security clearances; and those in positions of significant responsibility within federal, state, and local governments. Also, many jobs that involve caretaking in even the broadest sense commonly involve background checks-for example, teachers, home- and child-care providers, counselors, babysitters, dog walkers, and more.

Background checks have not only become more common, but they’re also less expensive than they’ve ever been. The computerization of data has made it possible to learn far more in a credit check these days, with far less effort, than was the case just a few years ago. Databases of criminal convictions are much easier to access and search, and ease of using the Internet has resulted in tremendous competition for a business’s background screening needs. Prices have plummeted for credit and other simple background checks, and even elaborate checks now take a fraction of the time they used to.

“THE COMPUTERIZATION OF DATA HAS MADE IT POSSIBLE TO LEARN FAR MORE IN A CREDIT CHECK THESE DAYS, WITH FAR LESS EFFORT, THAN WAS THE CASE JUST A FEW YEARS AGO.”

5

HOWThere are many laws covering background checks, including the federal Fair Credit Reporting Act (FCRA) and anti-discrimination statutes. Your state might also have its own laws governing background screening. For example, Oregon doesn’t allow employers to use credit reports as a basis for hiring decisions, but most states allow reasonable background checks as long as two simple rules are followed:

1. Make sure the candidate for screening has given consent for the background check; and knows that information disclosed in the check may be used to deny employment, credit, or other services.

2. Provide the candidate with the results of any reports that were the cause for rejection, along with information on how this individual can contact the screening agency to contest or correct negative information.

As long as you follow these guidelines for disclosure before and after an adverse decision, you’ll be on the right side of most federal and state laws concerning background screening.

“THERE ARE MANY LAWS COVERING BACKGROUND CHECKS, INCLUDING THE FEDERAL FAIR CREDIT REPORTING ACT (FCRA) AND ANTI-DISCRIMINATION STATUTES.”

6

Background checks have changed a lot in just the past couple years, thanks to the increasing computerization of vital records, as well as to challenges associated with a difficult economy. Let’s take a look at some of these trends.

Dishonesty in Applications and ResumesThe recession of 2008 resulted in many more unemployed people taking longer and longer to secure jobs. As the challenge to find work increased, so did the temptation to stretch the truth on job applications and resumes. Over the past five years, employers in all industries have reported a marked increase in the number of cases where job applicants were less than truthful.

Increased Relocation Across State LinesPeople don’t stay in one place as much as they used to. Between traveling for work, school, and employment, people are moving across state lines more than ever before. Background checks become more challenging to perform as more applicants change locations.

More International EmployeesThe labor force isn’t just fluid within the United States. Many people are working both domestically and abroad. As such, collecting information from outside the U.S. can be difficult and time-consuming.

TRENDS

7

Stricter Privacy LawsIn the United States, Europe, and elsewhere, new laws have been enacted restricting the amount of data that can be maintained on someone; as well as legislating who has access to that data and what it can be used for. Three states prohibit using credit-report information for making hiring decisions. Similarly, the federal government prohibits credit-reporting agencies from going back more than seven years to obtain a credit history on an individual.

Checking Social Networking SitesIt has become a common practice for employers to review Facebook pages and other social networking sites to prescreen candidates for employment. However, some states are curbing this practice. In Maryland, Illinois, and California, for example, it’s illegal to ask job candidates for passwords to their online accounts.

Integrating Background Checks with Other HR SystemsMany background check providers use the service as one element of a larger human resources (HR) system. For example, many trucking companies purchase not only an initial background screening on drivers, but also one that checks every month for traffic violations-whether these infractions occurred on the job or off. Some HR systems automatically flag data in a report that is beyond a threshold set by the company, thereby

eliminating the need to scrutinize screening reports on candidates who fail to meet minimum qualifications.

E-Verification of Employment EligibilityPerhaps the simplest type of background check is to determine whether an applicant is qualified for employment in a particular state. Many states have set up electronic verification (e-verify) systems so that employers can quickly check the accuracy of a Social Security number, as well as whether or not the candidate can be legally employed.

Better Data, Lower PricesNo trend is more obvious in background checks than that of higher-quality information at a lower cost. The availability of computerized records has made background screening services ultra-competitive. More of the process is automated than ever before, and prices for basic checks have plummeted. The security of the entire process is better than ever, and turnaround times have dropped from a few days to a few minutes for basic checks. For these reasons, it costs less than ever-and takes less time-for a business to protect itself from fraud and misrepresentation. The question is no longer: “Do I really need a background check,” but “Why wouldn’t I use this simple, low-cost method to avoid problems down the road?”

8

The following services may be included in a background check-from simply verification of an address, to conducting detailed interviews with relatives and former co-workers-as well as information on how long it typically takes to get results.

People Search (instant)Using readily available records to verify home addresses, phone numbers, email addresses, and other basic information.

Credit Report (instant)There are three major credit-reporting agencies in the United States: Experian, Equifax, and TransUnion. But they aren’t the only ones. There are several other credit bureaus

and thousands of firms that provide credit reports, which typically provide information on bank accounts, credit cards, loans, and address histories; as well as other names people have used in order to secure credit.

Criminal Records (1 day)Searches of a federal database of criminal convictions have become fairly fast and routine.

FEATURES

THERE ARE THREE MAJOR CREDIT-REPORTING AGENCIES IN THE UNITED STATES: EXPERIAN, EQUIFAX, AND TRANSUNION. BUT THEY AREN’T THE ONLY ONES.”

9

Employment Records (1-3 days)Verifying the employer, employer’s address, duration of employment, positions held, and sometimes additional data such as pay rate.

Motor-Vehicle Records (2 days)Verifying records kept by motor-vehicle bureaus, including drivers’-license and vehicle-ownership records and moving violations.

Drug Screening (pre-employment, random; 1-3 days)Screening for controlled or prohibited substances is often done as part of a pre-employment screening process, and then periodically performed on employees on a random basis. State laws vary on when drug screening can be used and what it can cover.

Civil Court Records (3-5 days)A check on whether the applicant is the subject of a lawsuit or has instigated lawsuits against others in the past.

State Court Records (3 days)Includes a variety of records kept by state courts.

County Court Records (3 days)Many records are kept at the county level in the U.S., and they don’t always percolate up into state or federal records checks. These include such things as marriage and divorce records, adoption records, and violations of county laws or regulations.

Offender Lists (3 days)Registries of those convicted of various crimes. Many states maintain sex-offender and drunk-driver registries, and lists detailing other kinds of offenders.

Legal Proceedings (3-5 days)This is a check to see if the candidate is involved in any current legal proceedings that are making their way through court and have not yet been ruled upon. Cases in progress don’t show up in databases of county, state, and federal court decisions.

School Records (1-3 days)Screening usually involves verifying the dates of attendance and graduation, and degrees earned (if any).

10

Screening may include grades, test scores, attendance records, disciplinary actions, awards, or other information related to an applicant’s scholastic history.

Professional Training Completion (1-3 days)Verification that the candidate is entitled to use the professional training certificates and designations he or she claims. Also can be used to verify that the candidate has completed the required continuing education to maintain a particular professional designation.

Reference Checks (3-5 days)The process of contacting the references provided by the applicant and verifying the information on the application. Reference checks often involve soliciting assessments on the applicant’s performance.

Media Searches (2 days)In-depth searches of periodicals, radio transcripts, television transcripts, photos, and other media in an attempt to identify every instance of a candidate getting media coverage.

Conducting Interviews (time varies)Beyond reference verification, screeners may have a need to conduct personal interviews with individuals known to the applicant. These interviews could be as quick as an email or as formal as a legal deposition.

Personality Assessments (time varies)There are a number of personality tests that employers use to see if an applicant is a good fit for an organization. Tests such as Myers-Briggs claim to be able to determine whether an employee is a risk-taker or cautious, an introvert or extrovert, among other traits. These tests can be rather elaborate-including so-called 360-degree assessments that ask what co-workers, customers, suppliers, and others who interact with an organization think about the applicant.

Psychological Assessments (time varies)Psychological assessments of a candidate’s fitness for a position can range from a simple IQ test to an evaluation by a trained psychiatrist.

Aptitude Assessments (time varies)Tests to determine if a candidate meets various specific criteria for employment or advancement. These tests usually relate specifically to the job description, such as an ability to lift a maximum amount of weight for postal-carrier candidates.

“THERE ARE A NUMBER OF PERSONALITY TESTS THAT EMPLOYERS USE TO SEE IF AN APPLICANT IS A GOOD FIT FOR AN ORGANIZATION.”

11

The rules governing background checks are not only established by each country’s national government, but also by subdivisions, such as states, counties, and cities. For example, some jurisdictions prohibit basing decisions on records of arrest rather than records of convictions. Many large organizations also have their own internal rules for what may or may not be included in screenings.

Most background check providers are thoroughly familiar with the screening laws in the territories in which they operate. It’s when you try to do your own screenings in-house that you need to be very careful about complying with the laws in your jurisdiction.

The U.S. federal law governing background screening in the United States is the Fair Credit Reporting Act (FCRA).

KNOW THE LAW

“EMPLOYERS HAVE TO OBTAIN THE WRITTEN CONSENT OF APPLICANTS AND EXISTING EMPLOYEES BEFORE VIEWING THEIR CREDIT REPORTS.”

12

The act comprises many rules for credit-reporting bureaus, such as how far they’re allowed to go back in order to check on and report on an applicant’s credit history. But even if you’re using a credit-reporting agency to do your screening, you must follow a few important rules when initiating credit checks:

1. Employers have to obtain the written consent of applicants and existing employees before viewing their credit reports.

2. Employers must provide applicants and employees a summary of their rights under the FCRA before taking an adverse action against them based on a credit report.

3. Applicants have the right to obtain a copy of their credit reports and dispute erroneous or incomplete information with the credit-reporting agency after they’ve been rejected based on negative information in a report.

“EVEN IF YOU’RE USING A CREDIT-REPORTING AGENCY TO DO YOUR SCREENING, YOU MUST FOLLOW A FEW IMPORTANT RULES WHEN INITIATING CREDIT CHECKS.”

13

Select a background check provider and open an account.

Choose the package of screening services you desire.

Verify that you have consent from the candidate.

Input data about the candidate (or have the applicant input the data).

Authorize the background check firm to conduct the screening.

Analyze the results of the screening.

Notify the candidate of your decision.

Provide documentation required by law.

STEP BY STEP

1

2

3

4

5

6

7

8

14

Basic Screening (1 day) $20-$55

• Social Security number verification• Social Security address verification• National criminal database search• State sex-offender registry search

Advanced Screening (1-3 days) $55-$150

• Federal court records search• State court records search• County court records search• State Department of Motor Vehicles search• Drug testing ($30-$100 per test)

Custom Screening Services (time and pricing varies)

• FBI fingerprint check (2-5 weeks)• Presenting results to candidates• Continual monitoring ($10/month/employee)• Auditing current compliance

CALCULATING COSTS

15

Use a Vendor. Yes, you can do background checks yourself, but do you have the staff to research state laws and make sure you’re in continual compliance? Given the brisk competition and low prices for background screening services these days, you’re better off putting a third party between you and the ultimate decision. If there’s a lawsuit, it’s the background screening firm-not you- that bears the greatest liability.

No Hit, No Fee. Some background check services are so confident that they’ll unearth something amiss that the report is free if it doesn’t turn up anything negative. They call it “no hit, no fee.” Be sure to ask if your vendor offers such a guarantee.

Check Social Networks. Several states have ruled that employers cannot require applicants to reveal their social networking passwords-but you’re free to see what you can dig up without one. You might be amazed by what you’ll find. A 2012 survey of 300 employers showed that over 90% reviewed an applicant’s social networking activities before extending a job offer, and an astonishing 69%

said that they’ve rejected a candidate as a result of that search. Ask your vendor for a price that includes social networks in the screening package.

PURCHASING TIPS

16

This checklist will help you quickly assess the best vendor for your needs.

Gathering Data

Online Data Input

Online Consent Forms

Identity Verification System

Candidate Can Input Data

Business Can Input Data On Candidate

Authorized Agent MustInput Data

Access To Results

Instant Results

Levels Of Access To Results

Can Authorize Multiple Viewers Of Results

Results Explained By Screener

Results Presented To Candidate By Screener

Results Stored Online

Pricing And Turnaround Time

Cost For Basic Background Check

Turnaround Time For Basic Check

Cost For Intermediate Check

Turnaround Time For Intermediate Check

My Needs Vendor 1 Vendor 2 Vendor 3

BACKGROUND CHECK CHECKLIST

17

This checklist will help you quickly assess the best vendor for your needs.

Cost For Advanced Check

Turnaround Time For Advanced Check

Volume Discounts

Surcharge For Rush Delivery

“No Hit, No Fee” Pricing Policy

Advanced Services

Flags Discrepancies In Application

Adjustable Minimum Rules

Flags Failures ToMeet Minimum Rules

Adverse Action Letters

Adverse Action Notifications

Annual Updates Of Screenings

Vendor ReputationMember Of National Association Of Professional Background Screeners (NAPBS)

Professional Certification

Number Of Years In Business

Specialist In Your Industry

No Negative Chatter About Vendor

Live Online Customer Service

Live Phone CustomerService

My Needs Vendor 1 Vendor 2 Vendor 3

18

Adverse Action Letters: The Fair Credit Reporting Act (FCRA) requires that candidates receive advance notice, called a “pre-adverse action letter,” if a credit, housing, or hiring decision might be based on information from a background check. The FCRA also requires an “adverse action letter” when a candidate has been declined based on a background screening. An adverse action letter must identify the company that provided the background report, as well as a way to contact the provider.

Conditional Job Offer: A job offer extended on the condition that an employee passes a background check. This allows companies to hire before receiving screening results.

Equal Employment Opportunity Commission (EEOC). A division of the United States government executive branch, the EEOC sets rules and regulations for what you’re allowed to investigate when doing background screenings on employees, candidates for employment, or contractors.

E-Verify: A Web-based program operated by the Social Security Administration to assist employers in determining whether an employee is eligible to work in the U.S. and whether the employee’s Social Security number is valid.

Fair Credit Reporting Act (FCRA). A U.S. federal law governing credit-reporting practices, including what you’re not allowed to screen for when conducting background checks related to lending, housing, or other contracts. Enforced by the Federal Trade Commission.

GLOSSARY OF TERMS

“FAIR CREDIT REPORTING ACT (FCRA) IS A U.S. FEDERAL LAW GOVERNING CREDIT-REPORTING PRACTICES.”

19

Human Resource Management System (HRMS). Also called a human resource information system (HRIS), this is a broad collection of software and practices for managing the process of hiring and evaluating employees and potential candidates.

National Association of Professional Background Screeners (NAPBS). A trade group that establishes standards for background screening practices and offers training programs and certification programs.

No Hit, No Fee: A practice among some screening services to provide a background report without charge if it doesn’t unearth anything amiss about the candidate.

“HRMS IS A BROAD COLLECTION OF SOFTWARE AND PRACTICES FOR MANAGING THE PROCESS OF HIRING AND EVALUATING EMPLOYEES AND POTENTIAL CANDIDATES.”