Several other states including Illinois and California are considering similar legislation.

The Association of Certified Fraud Examiners’ 2012 Report to the Nations on Occupational Fraud and Abuse is based on data compiled from a study of 1,388 cases of occupational fraud that occurred worldwide between January 2010 and December 2011. According to the report:

• The typical organization loses 5% of its annual revenue to occupational fraud.
• The median loss caused by the occupational fraud cases in the study was $140,000. More than one-fifth of the cases caused losses of at least $1 million.
• Occupational fraud is a significant threat to small businesses. The smallest organizations suffer the largest median losses.
• Nearly half of victim organizations do not recover any losses that they suffer due to fraud.
• In 81% of cases, the fraudster displayed one or more behavioral red flags that are often associated with fraudulent conduct. Living beyond means (36% of cases), financial difficulties (27%), unusually close association with vendors or customers (19%) and excessive control issues (18%) were the most commonly observed behavioral warning signs.

The report provides a Fraud Prevention Checklist that recommends a background check (as allowed by law) that includes:

• Past Employment Verification
• Education Verification
• Criminal Record Checks
• Civil Record Checks
• Credit Checks
• Reference Checks
• Drug Screening

Source:

• ACFE: 2012 Report to the Nations on Occupational Fraud and Abuse

Take Aways:

• Occupational fraud is a significant issue to all employers, especially small businesses.
• Thorough background check procedures are one of the protections employers need to put in place.

Related Resources:

• A Detailed Comprehensive Background Check: The Best Background Check
• Employment Background Checks: What Do We Recommend?

Selected items from the guidance:

The Guidance focuses on employment discrimination based on race and national origin. An employer’s use of an individual’s criminal history in making employment decisions may, in some instances, violate the prohibition against employment discrimination under Title VII of the Civil Rights Act of 1964, as amended. Arrest and incarceration rates are particularly high for African American and Hispanic men.

The fact of an arrest does not establish that criminal conduct has occurred, and an exclusion based on an arrest, in itself, is not job related and consistent with business necessity. However, an employer may make an employment decision based on the conduct underlying an arrest if the conduct makes the individual unfit for the position in question.

A conviction record will usually serve as sufficient evidence that a person engaged in particular conduct. In certain circumstances, however, there may be reasons for an employer not to rely on the conviction record alone when making an employment decision.

The Commission believes employers will consistently meet the “job related and consistent with business necessity” defense if the employer develops a targeted screen considering at least the nature of the crime, the time elapsed, and the nature of the job. The employer’s policy then provides an opportunity for an individualized assessment for those people identified by the screen, to determine if the policy as applied is job related and consistent with business necessity. (Although Title VII does not require individualized assessment in all circumstances, the use of a screen that does not include individualized assessment is more likely to violate Title VII.).

Best Practices

The EEOC gave examples of best practices for employers considering criminal records when making employment decisions, including:

• Eliminate policies or practices that exclude people from employment based on any criminal record (without considering at least the nature of the crime, the time elapsed, and the nature of the job).
• Develop a narrowly tailored written policy and procedure for screening applicants and employees for criminal conduct (provides for an individualized assessment for those people identified by the screen).
• Train managers, hiring officials, and decisionmakers about Title VII, its prohibition on employment discrimination and how to implement the policy and procedures consistent with Title VII.
• When asking questions about criminal records, limit inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity.
• Keep information about applicants’ and employees’ criminal records confidential. Only use it for the purpose for which it was intended.

Individualized Assessment

The EEOC recommends individualized assessments of individuals that may be excluded due to past criminal conduct. Examples of relevant information that may be considered in an individualized assessment include:

• Facts or circumstances surrounding the offense or conduct
• Number of offenses for which the individual was convicted
• Age at the time of conviction, or release from prison
• Evidence that the individual performed the same type of work, post conviction, without incidents of criminal conduct
• Length and consistency of employment history before and after the offense
• Rehabilitation efforts, e.g., education/training
• Employment or character references
• Whether the individual is bonded under a federal, state, or local bonding program

Take Away:
Employers should review and modify, as necessary, their background check policies and practices.

Source:
Background Check Laws & Regulations: EEOC Guidance On Use Of Criminal Records

According to Leh there are three primary reasons not to collect social media information:

• Information from a social media account is not likely to be job-related; traditional interviews, reference checks, employment testing, and background checks are sufficient.
• Social media accounts may give employers information about applicants that they would be better off not having when making employment decisions.
• Seeking social media login information is likely to open the employer to a public shaming campaign and discourage likely candidates.

Several jurisdictions are considering legislation to restrict employer access to social media information. The Maryland state legislature has already passed such a law that awaits the governor’s signature.

Employers who desire a comprehensive background check should review our article Employment Background Checks: What Do We Recommend?

“Free Resources Help Identify Reputable Background Check Companies” discusses resources that can help identify credible professional background check firms:

• National Association of Professional Background Screeners (NAPBS®) Accreditation
• ConcernedCRAs Membership
• Better Business Bureau Accreditation

Other Resources:

• The Inside Story: The Best Background Check Service
• Background Check FAQ

The criminal background check employer guide contains several important ideas to consider when conducting an employment background check. The ideas include:

• Background checks cost money and can be inaccurate. Carefully survey positions to determine background check requirements.
• Do not inquire into criminal history on the initial application; delay the inquiry until the final stages.
• Include a notice that a conviction is not an automatic bar to employment.
• Avoid violating federal law – do not ask about or consider arrest records.
• Comply with the Fair Credit Reporting Act requirements, including: provide notice and obtain worker consent, give the applicant a copy of the background report prior to any rejection, and allow the applicant to correct information.
• Comply with federal law by only considering convictions that are both job-related and recent. Consider the circumstances surrounding the offense and any evidence of rehabilitation.
• Give the applicant written notice of potentially disqualifying conviction(s) and allow the applicant to provide information regarding the offense(s), including evidence of rehabilitation.

Source:

• NELP: Criminal Background Checks, A Best Practices Guide For Employers
  

Resources:

• Criminal Background: Consider the Risks–And Rewards–Of Hiring Ex-Offenders
• Step-by-Step: How to Do a Background Check
• Background Check Laws & Regulations
• Background Check Frequently Asked Questions

1. Failure to Conduct Background Checks that “Fit” the Job

No Background Check – Nearly all jobs justify at least a basic background check. “In God we trust, everyone else must have a background check.” Employers are expected to conduct due diligence to protect themselves, their employees, their customers, and the public. Notice that when an employee commits a crime, the news stories always talk about whether a background check was conducted.
The Same Background Check for All Jobs – A one-size-fits-all approach simply means that an employer is paying too much for background checks for lower risk jobs while at the same time creating unnecessary exposure for higher risk jobs.
Reliance on Criminal Record Checks Only – Far more applicants lie about or exaggerate their work history, education, certifications, etc. than have criminal records. A prudent employer will conduct a background check that verifies everything in an applicant’s history that is important to the job being filled.

In today’s litigious society and given the high number of applicants who lie about or exaggerate their backgrounds employers take on significant unnecessary risks if they fail to conduct adequate background checks. Bad publicity and negligent hiring lawsuits are common when inadequate background checks were conducted and harm comes to fellow employees, customers, or the public.

2. Sloppy Criminal Record Checks

Misuse of Criminal Database Searches – Criminal databases are notoriously inaccurate, incomplete, and out of date. In the hands of an expert they can be a great research tool, however criminal database searches should never be relied upon as the sole criminal record check source in a background check. Database searches are usually marketed as “Instant” and “Inexpensive” – real background checks are not cheap and take at least a few days.
Inquires into Arrest History - Except for actions currently in process, inquires into and use of an applicant’s arrest history are usually off-limits to employers.
Blanket or One-Size-Fits-All Prohibitions against any Criminal History – EEOC regulations clearly require that a criminal record must be job related and within a reasonable time period to disqualify an applicant. Different jobs will have significantly different criteria with regards to prior criminal history.

3. Failure to Comply with the Law, especially the FCRA

Failure to Comply with the FCRA attracts Class Action Lawsuits – The recent spat of class action lawsuits commonly identify three provisions of the FCRA (the miss-named Fair Credit Reporting Act) that employers fail to properly implement when using information obtained from a third party such as a background check company, credit bureau, or database company. The FCRA provisions commonly cited require, among other things:

• Applicant permission and notification in a separate document (e.g. not part of the job application).
• Pre-adverse action notification with sufficient opportunity for the applicant to respond if any adverse action is being considered based in part on information from the third party.
• A final adverse action notification.

Overlooking State and Local Laws and Regulations – More states and local government entities are instituting laws and regulations regarding employment background checks. Some of the areas that have received increased attention recently include regulated services, professions, and persons (e.g. those working with children and the infirm), use of credit reports, and inquiry into and use of criminal histories.

Employers need to implement sound employment background check practices and stay compliant with the changing requirements imposed by federal, state, and local laws and regulations.

Key Employer Takeaways:

• Avoid the unnecessary risk of bad hires, bad publicity and negligent hiring liability with background checks tailored to each job. Verify prior employment, education and other relevant factors.
• Avoid database-only criminal checks. Avoid inquires into arrest history (except for current actions). Avoid one-size-fits-all prohibitions against a prior criminal record.
• Comply with the FCRA and keep current with federal, state, and local laws and regulations.

Resources:

• FCRA Background Check Requirements for Employers
• Notice To Users Of Consumer Reports: Obligations Of Users Under The FCRA
• Background Check Laws & Regulations for Private Employers
• Employment Background Check Guidelines and Sample Policies
• The Best Background Check

Note: This information is for educational purposes only and should not be used as a substitute for professional legal advice.