Why Should Your Company conduct Background Checks on the employees

1. Why Should Your Company conduct Background Checks on the employees • Employment screening is aimed at helping employers decide who NOT to hire. Background checks are essential to the process of identifying, recruiting, attracting and retaining top employees. • A criminal record investigation may prevent the statistical certainty that a person with serious criminal record will be hired-10% rate of criminal records among those screened. • A department of justice study found that about two million violent incidents occur at work a year including 1,000 homicides, 600,000 assaults, 42,000 rapes/sexual assaults and 23,000 robberies • One in every 37 US adults have been incarcerated at one time, and the recidivism rate is 67% within three years of release from prison • Hiring criminals can create risk of workplace violence and past criminal conduct is frequently a common denominator in episodes of violence or criminal conduct

2. Hiring criminals can create risk of workplace violence and past criminal conduct is frequently a common denominator in episodes of violence or criminal conduct • Theft, Fraud and Embezzlement - Embezzlement can occur where there is opportunity+motivation+rationalization • Embezzlement is a crime of violating trust--criminals cannot get access to assets unless they gain your trust. An embezzler often has the same traits as best worker. • Employee dishonesty costs over $50 BILLION annually (US Dept. of Commerce) • One-third of business failures are direct result of employee theft (US Chamber of Commerce) • Over 42% of inventory shrinkage is due to employee theft • Studies show that even though people believe they can detect liars, at best there is only 50-50 chance. Per recent study, even trained law enforcement officers are only right about half the time • Fraudulent credentials: Up to 40% of resumes contain material lies or omissions about education, past jobs or qualifications. • Problem employees cause litigation problems. Every Employer has legal duty to exercise due diligence in hiring. • An employer can be sued for negligence if they hire someone who they knew, or in the exercise of reasonable care should have known, was dangerous or unfit for the particular job. • Unless employer has a compelling reason why injury was not their fault, employers usually lose when sued. Employers cannot claim that it is too costly or difficult to protect the public. • Employers have ability, duty and resources to prevent harm through due diligence, such as conducting background checks.

3. The Criminal Background is a Catch 22--No National Criminal/Credentials Database • Problem: contrary to popular belief, there is no national database available to private employers to check criminal records or false credentials Problem: Even though safe hiring is a necessity, no easy tool. • Fingerprint checks from FBI only available when mandated by law (e.g. teachers/child care workers) • The National Crime Information Center (NCIC) is restricted to law enforcement

4. Fingerprint checks only available when authorized by federal or state law (e.g. teachers, or child care workers) • Primary method for obtaining criminal records is to physically look at each relevant courthouse! • Over 10,000 courthouses in America with court records in over 3200 jurisdictions • Although criminal searches are crucial for due diligence, they are subject to human error as well

5. The Solution • The solution is a Employment Background Screening • Employers should institute a series of policies, practices and procedures designed to minimize the probability of hiring a dangerous, questionable or unqualified candidates • Critical elements are the Application, Interview and Reference Checking process • Pre-employment screening discourages applicants with something to hide, encourages honesty, demonstrates due diligence and helps to hire based upon facts and not just instinct

6. Advantages • The purpose of employment background screening is to mitigate the risk involved in the largest single line item of most firms-Employees • Background Screening helps an employer to:1. Discourage applicants with something to hide 2. Encourage honest interviews 3. Demonstrates due diligence 4. Eliminate uncertainties Per Small Business Administration, every dollar invested in screening can save $5 to $16 in reduced absenteeism, improved productivity and lower turnover

7. Not a probe into a person’s private life Not big brother or a sign of mistrust Not an in-depth FBI type report Looking for red flags or indicators Not a guarantee that every applicant with a significant problem will be identified, but a powerful tool used with resume review What It Is Not

8. What is a Criminal Record Search • The primary method for obtaining criminal records is to physically go to each relevant courthouse and look!! • There are Over 10,000 courthouses in America with court records in over 3200 jurisdictions in two court systems--State and Federal • Some jurisdictions contain multiple municipal or justice courts

9. 1. Application Process-Require Consent for Screening • Discourages applicant with something to hide • Encourages an honest applicant to disclose a previous problem--a mistake honestly admitted may have less impact • If employers uses a third party agency, need a separate standalone disclosure document per federal Fair Credit Reporting Act (FCRA) and California law

10. The Legal Aspects • The Fair Credit Reporting Act (FCRA) • Effect of state FCRA laws • EEOC and Discrimination law • Invasion of Privacy • Defamation

11. Purpose of FCRA • First passed in 1970 primarily to address issues involving credit • Purpose to promote confidentiality (privacy), accuracy and relevancy of information • Substantially amended in 1996 (effective 9/30/1997) • Regulates the activities of: 1 Consumer Reporting Agencies (CRA's); 2. users of consumer information (i.e. employers); 3. furnishers of consumer information, and 4. gives rights to consumers affected by reports on them • Fundamentality FCRA controls information about consumers by regulating information that certain third parties assemble and evaluate and then disseminate • Not limited to just Credit Reports-includes all sorts of information bearing on a consumer including public records

12. Sources of Information • Text FTC: http://www.ftc.gov/os/statutes/fcra.htm • FTC Web site (with prescribed notice to consumers, users and furnishers); http://www.ftc.gov/os/statutes/fcrajump.htm • The FCRA in Four Easy Steps • 1. Employer must certify will follow the law (not discriminate, use for employment only) • 2. Obtain written release and standalone disclosure • 3. Adverse Action letters: Pre-adverse action-copy of report and statement of rights so applicant can object if information inaccurate or incomplete. Entitled to post –adverse action letter if decision is final

13. Employer Certifications • Prior to providing a consumer report or investigative consumer report for employment purposes, employer must first certify to the CRA in writing that it will follow the FCRA rules concerning disclosure/authorization/notice and adverse action notices, and not use information in violation of any state/federal discrimination law • Carolina Investigative Research will provide this form

14. Investigative Consumer report • Per Section 606(b), upon written request of consumer, employer must make a complete and accurate disclosure of the nature and scope of the investigation no later then five days from request • State Laws: California Trends • At least 20 states have consumer laws that are broader than the Federal FCRA • CA first state to apply FCRA type rules on employers who obtain public record themselves (AB 655 in 2002) • Required employers to turn over all information to consumer in order to close loophole where FCRA does not apply to private employers • Amended September 2002 with AB 1068 and AB 2868

15. EEOC and State rules • EEOC prohibits inquires that discriminate on the basis of a protected classified and not a validly related to job performance or a bona fide occupational qualifications (BFOQ) • Cannot discriminate on basis of age, sex, religion, national origins, race, etc • Many states have their own laws • Americans with Disability Act (ADA) –ability to perform essential job function with or without reasonable accommodation (the current use of legal drugs is NOT a medical condition)

16. Verifying Past Employment (11:15-12:15) • Critical to verify employment to determine where a person has been (even if you only get dates and job title) • Looking for unexplainedgaps AND for locations to search for criminal records • If can verify person gainfully employed last five-ten years, less likely spent time in custody for serious offense • Just attempting and documenting effort demonstrates due diligence • Can also verify education/credentials

17. Past Employment Issues • All employers want references, but few will give them due to fear of being sued for DEFAMATION • Good applicants are often unable to get the recommendations they deserve • Problem applicants move on to unsuspecting employers with their past behind them

18. Difference Between Verification and Reference • Verification refers to Factualmatters, such as start and stop dates, job title and possibly salary • Reference checking refers to job performance--Qualitative matters

19. Why Need Verification • Demonstrate accuracy of resume • Even if former employer will only verify basic data, attempting to obtain a reference Demonstrates Due Diligence • Looking for Employment Gaps

20. Why Need References • Information v. Instinct • Past can be Prologue--unlikely that an employee will perform better for you than a previous employer • Protects important financial investment • Promotes better fit • Legal protection against negligent hiring

21. Practical Difficulties • No one will return calls • Will only verify by mail or with release • Uses 900 phone number only • Employer out of business/cannot be located • Company merged • Applicant was a temp/contract employee so not on payroll

22. Other Practical Problems • Military employment • Foreign employment • Challenges in international calling • Time zones, languages, finding phone numbers, verifying real business • Some employers will substitute local reference (someone in community?) • H-1B visa requirements

23. Who Should do Reference Checks • For critical position, often done in-house by hiring manager or HR • Problem with in-house calls: not all past employers called in a consistent fashion by hiring managers • For large hiring program, can outsource to a third party, such as an HR consultant or professional background firm • Outsourcing usually done to decide who NOT to hire, and not for purposes of the initial assessment

24. Check of public records - e.g., Criminal or civil court records, driving records Check of private records - e.g., Credit reports Verification of factual matters - e.g., Education, job history, professional licenses Reference checking - e.g., Job performance What Is Pre-screening and other tools available (1:15-2:00)

25. Additional Tools • Education • Driving records • Social Security trace • Credit Reports • Workers Compensation • Drug Testing • International Screening • Terrorist Searches • Honesty testing (validity/non-discriminatory)

26. Ten Things About Obtaining Criminal Records (2:00-2:30)1. Humans Perform the Searches • Researcher goes to actual courthouse • Public access computer (look-up by names) • Searches performed by court clerk • Paper indexes, binders or books (in some cases, need to search year by year) • Some counties charge an access fee • Can be name and spelling variations

27. 2. Must Confirm Identity • Initial search is usually by name match only • If there is a “hit” need to review actual file to obtain details and to confirm identity • Identifiers include date of birth, drivers license, or SSN • Delay possible if the court clerk needs to obtain the file, or file in storage • Some counties require a court fee

28. 3. Must Confirm Case Details • Must examine file to determine details of case • Need to determine if felony or misdemeanor, sentencing, future court dates, probation terms and nature of offense • Actual police reports often not available

29. 4. Federal and State Systems are Separate • State County courts often two tiered-Felony courts (e.g Superior or Upper Courts) and Misdemeanor courts. Some counties have separate traffic courts • In addition, if there are multiple misdemeanor courts, firms normally only search the central lower court--misdemeanor cases in outlying courts can be missed • The majority of all criminal prosecutions is in state courts • There are three categories of criminal offenses-felonies, misdemeanors, and infractions • Some offense can be either a felony or misdemeanor, depending on seriousness of offenses and /or if a person has prior convictions--called a “wobbler”

30. 5. Different Levels of Crimes • Three categories of criminal offenses: felonies, misdemeanors, and infractions • Felonies carry state prison sentence/ misdemeanors local time (county jail) • Felony can also be punished with probation and “local” county jail time • Some offenses can be either a felony or misdemeanor--called a “wobbler”

31. Federal Crimes • There are 94 federal judicial districts • A criminal matter becomes a federal case if there is an allegation of a violation of federal law • Many federal crimes could also be prosecuted in state court under state laws • Federal prosecutors have a great deal of discretion in the cases they accept

32. Federal System 2 • Federal cases are typically serious crimes (e.g. large drug cases, financial fraud, bank robbery, interstate crimes) • Federal offense are sentenced under the Federal Sentencing guidelines • Sentences can be very long (especially for violent crimes, gun use or drug offenses) with many federal crimes carrying 10 year minimum mandatory prison sentences

33. Federal System 3 • Many employers do not find it as valuable to do federal criminal searches since federal crimes are a very small percentage of all criminal cases • Since many federal sentences are long, very hard for a person to hide federal crime if employer checks past employment--applicant would normally have an unexplained employment gap

34. 6. Alternative punishments • Jail alternative programs e.g. home detention or “Commit a crime, go to your room,” or work furlough, work alternative program or weekend sentence • Diversion programs, delayed entry of judgment or similar programs can restrict ability to report offense • Person can seek can petition for certificate of rehabilitation, governor's pardon, etc.

35. 7. Big Mistake Not to Look For Misdemeanors • Big mistake to only look at felonies • Misdemeanors can be very serious--e.g. assaults, sexual offenses, weapons charges • Not unusual for felony charges to be reduced to a misdemeanor (plea bargain) • ALERT: Most misdemeanors searches limited to central court only. Some jurisdictions have numerous local courts, and they are very difficult to search

36. 8. Careful Using Databases • Excellent secondary source --covers wider area then a county search • Some databases are repositories only or maintained by correctional authorities • Only a few “true” statewide databases using information directly from the courts • Issues as to timeliness, accuracy, completeness, identity and final disposition of matter

37. 9. Must Determine Where To Search • Since no nationwide database for private employers, must select counties to search • Cannot search everywhere--never a guarantee that search is complete • Best protection: seven year county search of where applicant has lived, worked or studied based on a social trace (the credit header maintained by the credit bureaus), application and list of past addresses

38. 10. In-depth Criminal Searches Available • In addition, can also search : • Larger metro areas surrounding counties • Federal searches • Statewide database if available • Contact local prison system/Federal BOP • Sexual offender databases • DMV for driving related offenses

39. International Criminal Checks • Most countries do not have extensive public records systems available • Checks can be expensive and time consuming/ not always clear what courts are being checked or how records maintained • Can still verify schools, former employers, and criminal check for period living in US • Can also hire investigator in a country for in-depth search

40. Ten Things to Know About using Criminal Records (2:30-3:00) • 1. Not All Criminal Convictions Will Disqualify ApplicantLegal standard is fitness for a particular job • Person with theft conviction may not be good candidate to work cash register, but may be great worker in another capacity • Society has an interest in helping everyone get employed, especially those with criminal convictions--they need a job to become law abiding and taxpaying citizens

41. 2. No Automatic Disqualification Rule • Must apply EEOC test to criminal matter • Can have discriminatory impact by disqualifying a disproportionate number of members of certain groups • Must determine if there is a rational job related reason that person is unfit for the job • FACTORS: Nature and gravity of offense, when it occurred and nature of position

42. 3. Special Consideration if Using Arrest Records • If based upon arrest only (i.e. not adjudicated and not pending), then employer must make some reasonable inquiry into underlying facts • The issue is CONDUCT, not the mere fact of the ARREST • Employer should not just dismiss applicant's explanation, but should take reasonable steps to determine if the explanation is credible

43. 4. Approach if Applicant Lied • If background check locates criminal matter(s) that applicant misrepresented, then the dishonesty can be the basis to deny employment • That is reason why employment application should ask about criminal records in broad, clear language, and inform applicant that dishonesty is grounds to deny employment.

44. 7. Understanding the Conviction • Are there proper identifiers? • What was the crime? (What behavior was involved) • How does it impact a job decision? • Felony or misdemeanor? • How long ago? • Information current?

45. Some Common Terms • Nolo contrendere-no contest (same as guilty for criminal but has no impact on civil case) • Nolle prosse-dismissed, not prosecuted • FTA-Failure to Appear • Diversion or delayed entry of judgment-special programs in some states for first offenders • VOP-Violation of Probation • CA 1203.4-Certificate of Rehabilitation

46. 8. Can Employer Be Sued for Checking Criminal Records? • Chance of being sued successfully by a criminal for not hiring are probably remote • Near statistical certainty that without screening, employer will hire a criminal since 10-12% of screened applicants have criminal records • Employer must balance certainty that without screening they will hire a criminal against remote possibility of lawsuit • The FCRA guards against mistake--applicant can review report prior to adverse action

47. Implementing a Background Screening Program (3:15-4:00) • Developing Policies • SAFE Hiring System • Background Screening Workflow • Type and Level of Screening • FAQ’s about a screening program • Outsourcing • Summary of Ten Safe Hiring Tools

48. Policies • Best practice to have policies in employee manual • Should have an internal policy addressing key issues: • Who is in charge • Mechanics of sending orders/receiving reports • Level of screening and Consistency • Privacy and Confidentiality • Dealing with adverse information (e.g criminal records/credit information, etc) • Applicant rights (e.g., non-discrimination, FCRA, CA laws)

49. Background Screening Workflow • Reports typically take 48-72 hours • Criminal records and verification of employment, education and credentials are done manually at court or contacting appropriate source. • With typical internet system, can track status of all orders 24/7 • Source of out of control delays include court clerk delay in pulling criminal files, schools that are closed, or employers who cannot be located or do not return calls

50. Type and Level of Searches • Depth of search depends upon position and risk involved • Basic rule-treated similarly situated applicants the same • At a minimum, follow AIR Process and do a criminal search • More in-depth searches for higher positions