Fair Credit Reporting Act (FCRA) Compliance
The intent of the Fair Credit Reporting Act (FCRA), is to protect consumers who are subject to employment-related background and reference checks. It is enforced by the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC).
In 2018 FCRA lawsuits became all too commonplace for employers who conduct background checks through a third party (known as Consumer Reporting Agencies (CRAs) such as RefCheck®). In the course of litigation, a CRA’s history of litigation and sanctions (as well as the employer’s), will certainly come under scrutiny. Employers are therefore wise to choose their background-screening partner carefully. In more than 32 years in business RefCheck has never been named in a lawsuit, nor have our practices been reviewed or sanctioned by any regulatory agency.
2018 saw settlements related to alleged violations of the FCRA continue. Among others, significant financial repercussions to companies not in compliance included:
This list serves as a reminder that even the largest of organizations, which one would expect to have the legal resources to ensure adherence/compliance, can run afoul of the FCRA.
Ban the Box and Salary History
Ban the Box continued to present challenges to employers in 2018. More than 150 cities and counties, as well as 34 states, have now passed Ban the Box laws, which prohibit employers from obtaining criminal record data at the time an application for employment is completed. Additionally, laws prohibiting employers from seeking salary history information are also becoming more prevalent, in an effort to narrow the gender wage gap.
Example of companies that reached agreements with the Massachusetts Attorney General in 2018 for alleged violations of the state’s Ban the Box statute: Five Guys Burger and Fries, L’Occitane, Edible Arrangements, and The Walking Company.
When qualified candidates are hard to come by, employers feel the pressure to fill positions. The rigors of due diligence may be loosened, as candidates continue to inflate former job titles, or “adjust” dates of employment to hide an unsuccessful stint at an unreported employer. The consequences to the employer remain the same: Matters of ethics, poor cultural matches, and likely occurrences of bullying and workplace violence.
The unfortunate trend of workplace violence continued in 2018. A few examples:
A year after the #MeToo movement stormed through our society, the Equal Employment Opportunity Commission (EEOC), in an unusual press release, published its preliminary sexual harassment data for fiscal year 2018. The report shows a 50 percent increase in cases with allegations of sexual harassment over 2017.
New charges of sexual harassment filed with the EEOC jumped to more than 7,500 cases (a 12 percent increase over 2017). This was the first increase in eight years.
In 2017 the agency recovered $47.5 million through litigation and administrative enforcement. In 2018 the number jumped to nearly $70 million.
Compliance with the Fair Credit Reporting Act
Maneesha Mithal, Associate Director of the FTC’s Division of Privacy and Identity Protection, has reported that “vigorous” enforcement of the FCRA remains a top priority for the agency.
Recommendation: Employers are urged to remain current in FCRA requirements and to review their policies, procedures, and day-to-day practices as they relate to employment background checks. For 2019 our advice remains the same: Make sure that HR leadership and legal counsel have adequate training in the requirements and nuances of the FCRA.
Ban the Box and Salary History
Recommendation: It is imperative that employers seek legal counsel on matters pertaining to Ban the Box and pre-employment salary history questions.
Résumé fraud is a business reality; it does and will continue to occur. The question is, “How much of a lie, or how many, am I willing to overlook, not only from entry-level applicants, but also from executive-level candidates and prospective board members?” The Yahoo! résumé fraud incident with Scott Thompson, then-president of the company, brought to light the far-reaching implications of résumé fraud. The discovery resulted in his departure, and ultimately led to allegations of malfeasance against some board members for not exercising due diligence in vetting the president, as well as questions regarding some board members’ own reported credentials.
Today there are online services that show candidates how to “fill the gaps” in their employment history and how to get fake references. False college degree documents, complete with transcripts and letters of recommendation, can be had for as little as $199.
Recommendations: As you consider your company’s tolerance for misinformation, employers are urged to look beyond the “white lie” or the excuses the applicant offers to explain the overlooked “mistake.” Résumé fraud can be an indicator of future “misinformation.”
Consider what information you will confirm on each and every candidate. Confirmation of reported education, dates of employment, and reason for their departure from an employer—particularly a recent employer—are baseline steps in conducting thorough background checks. These are items which, if not fully vetted, can have a significant negative impact on your organization.
Before an employer is forced to deal with anger management in the workplace, it is best to take proactive steps to avoid such a hire in the first place.
Recommendations: It is nearly impossible to eliminate the threat of workplace violence completely, but effective utilization of the tools available to employers, particularly thorough reference checks, can significantly reduce the risk of hiring an individual who is likely to commit a crime at work. Keep in mind that workplace violence is not only the use of a weapon. It’s bullying, it’s disrespect for co-workers and managers, it’s unwillingness to follow directions and adhere to safety rules. The commitment to providing a safe workplace results in better, safer hires. Criminal records are an effective but limited tool—they net exactly what the term implies: a criminal history, if there is one. Armed with information from references, an employer is in a better position to understand the candidate’s history prior to making the decision to hire.
The #MeToo movement brought sexual harassment into the national limelight. No longer can employers turn a blind eye to it, or ignore it in its hiring practices.
Victoria Lipnic, acting director of the EEOC, said, “[In 2017] we were acting on [sexual harassment] with every tool available to us….One of the overarching concerns that I’ve had over this past year is that with so much focus on these big celebrity-driven and media-driven pieces, [it might get lost that] the people who come to the EEOC are also working in mom-and-pop shops and small companies. This stuff happens everywhere. If you don’t address it in your workplace, you could find yourself on the receiving end of federal enforcement.” The financial implications, as seen in the EEOC’s reported recovery of $70 million in 2018, is today’s reality for all employers, large and small.
Recommendations: Given the EEOC’s focus on sexual harassment, it is imperative that leaders in every organization recognize not only the moral value of eliminating sexual harassment in their organization, but also the financial implications of failing to do so. While effective policies, training, and other traditional ways of addressing sexual harassment may be in place, pre-employment screening is a critical tool in eliminating candidates who may pose a threat to individuals in your organization and to the bottom line.
In addition to our day-to-day work with clients conducting thorough reference and background checks, we also offer management consulting services in two key areas:
If RefCheck can be of assistance to you as you build, grow, and mature your business and hiring practices, we’re here to help. Please contact me at firstname.lastname@example.org, or call me at 800-510-4010, x 12.
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About the Author
Zuni Corkerton is the Founder and President of RefCheck® Information Services, Inc., a human resources-based firm that focuses on providing stellar employers with in-depth–not generic–background-screening services. She founded the company in 1986, when as director of employee relations for a regional bank she found that hiring blind was not a sound business option. She needed solid, objective, job-related background information on the bank’s candidates. RefCheck® helps employers to perform their due diligence in the selection process in order to protect their employees, and to protect their organizations from the risks inherent in the selection process: employee theft, workplace violence, and negligent-hiring and negligent-retention allegations. Adherence to federal and state laws is of paramount importance to the company.
Please call (800-510-4010, x 12) or email Zuni (email@example.com) to schedule a free, confidential analysis of your current screening practices, and to determine how RefCheck® can help you to mitigate risk, protect your bottom line, and improve hiring.
Notice: Nothing in the material provided is intended to be or should be relied upon as legal advice. Readers are strongly advised to seek legal counsel. The author is not an attorney, and the information provided is for informational purposes only. Neither the author nor RefCheck® is engaged in rendering legal advice.