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The Changing Landscape of Background Investigation

In: Business and Management

Submitted By akansha011
Words 4393
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| the changing landscape of background investigation in hr |

OBJECTIVE: To know the need for background investigation in hiring a candidate. Through this paper, we bring out the logic behind the investigations and discuss some cases to corroborate that logic. Laws and rules governing the investigations will also be looked into. Some of the best practices will then be discussed as a practical approach to the issue. DEFINITION: A background check or background investigation is the process of looking up and compiling criminal records, commercial records and financial records of an individual or an organization.
REASON: Litigation problems can arise if employees have an incorrect background to them. Every employer has a legal duty to exercise due diligence in hiring and protecting its employees and assets. Estimates are that 30%-40% of job resumes includes some false or inflated facts. Additionally, some Federal and State Laws require background checks be conducted for certain positions. Background checks are often requested by employers on job candidates for employment screening, especially on candidates seeking a position that requires high security or a position of trust, such as in a school, hospital, financial institution, airport, and government. These checks are traditionally administered by a government agency for a nominal fee, but can also be administered by private companies. Background checks can be expensive depending on the information requested. Results of a background check typically include past employment verification, credit history, and criminal history. These checks are often used by employers as a means of objectively evaluating a job candidate's qualifications, character, fitness, and to identify potential hiring risks for safety and security reasons. Background checks are also used to thoroughly investigate potential government employees in order to be given a security clearance. However, these checks may sometimes be used for illegal purposes, such as unlawful discrimination (or employment discrimination), identity theft, and violation of privacy.
Checks are frequently conducted to confirm information found on an employment application or résumé/curriculum vitae. They may also be conducted as a way to further differentiate potential employees and pick the one the employer feels is best suited for the position. Employers have an obligation to make sure their work environment is safe for all employees and helps prevent other employment problems in the workplace.
Checks are also required for those working in positions with special security concerns, such as trucking, ports of entry, and airports (including airline transportation). Laws exist to prevent those who do not pass a criminal check from working in careers involving the elderly, disabled, or children.

Pre-employment screening: Pre-employment screening refers to the process of investigating the backgrounds of potential employees and is commonly used to verify the accuracy of an applicant's claims as well as to discover any possible criminal history, workers compensation claims, or employer sanctions. For example, CBC News of Canada reported that fraud in the workplace cost Canadian Businesses over $3.2 Billion in 2011.
Thoroughly pre-screening job applicants helps in following:
1. Saves time and money
2. Avoids negligent hiring lawsuits
3. Provides a safer work environment
4. Detects falsified job applications
5. Gives facts to make sound hiring decisions

Screening applications in the UK: A number of annual reports, including BDO Stoy Hayward's Fraudtrack 4 and CIFAS's (The UK's fraud prevention service) 'The Enemy Within' have showed a rising level of major discrepancies and embellishments on CVs over previous years. Such business fraud cost United Kingdom businesses $1.4 billion in 2005.
Almost half (48%) of organizations with fewer than 100 staff experienced problems with vetted employees. Thirty-nine percent of UK organizations have experienced a situation where their vetting procedures have allowed an employee to be hired who was later found to have lied or misrepresented themselves in their application.
Since the onset of the financial crisis of 2007–2010, the level of fraud has almost doubled and some experts have predicted that it will escalate further. Annual research by Powerchex has also shown that the number of applicants lying on their applications has been increasing steadily since the summer of 2007 when the financial crisis of 2007–2010 began.

Types of checks: * Employment References * Character Reference Check * Gaps in employment history * Identity and Address Verification - whether the applicant is who he or she claims to be. Generally includes verification of the candidate’s present and previous addresses. Can include a money laundering, identity and terrorist check and one to verify the validity of passports. * Whether an applicant holds a directorship * Credit History (credit score is not included) - bankruptcies * Criminal History Report.

Criminal, arrest, incarceration, and sex offender records
There are several types of criminal record searches available to employers, some more accurate and up to date than others. These "third party" background checking agencies cannot guarantee the accuracy of their information, thus many of them have incomplete records or inaccurate records. The only way to conduct an accurate background check is to go directly through the state. Most times using the state of choice is much cheaper than using a "third party" agency. Many websites offer the "instant" background check, which will search a compilation of databases containing public information for a fee. These “instant” searches originate from a variety of sources, from statewide court and corrections records to law enforcement records which usually stem from county or metro law enforcement offices. There are also other database-type criminal searches, such as statewide repositories and the national crime file. A commonly used criminal search by employers who outsource is the county criminal search.

Citizenship, immigration, or legal working status
The hiring of illegal workers has become an issue for American businesses since the forming of the Department of Homeland Security and its Immigrations and Customs Enforcement (ICE) division. Many history making immigration raids over the past two years have forced employers to consider including legal working status as part of their background screening process. All employers are required to keep government Form I-9 documents on all employees and some states mandate the use of the federal E-Verify program to research the working status of Social Security numbers. With increased concern for right-to-work issues, many outsourcing companies are sprouting in the marketplace to help automate and store Form I-9 documentation. Some jobs are only available to citizens who are residents of that country due to security concerns.

Litigation records
Employers may want to identify potential employees who routinely file discrimination lawsuits. It has also been alleged that in the U.S., employers that do work for the government do not like to hire whistleblowers who have a history of filing qui tam suits.

Driving and vehicle records
Employers that routinely hire drivers or are in the transportation sector seek drivers with clean driving records—i.e., those without a history of accidents or traffic tickets. Department of Motor Vehicles and Department of Transportation records are searched to determine a qualified driver.

Drug tests
Drug tests are used for a variety of reasons—corporate ethics, measuring potential employee performance, and keeping workers' compensation premiums down.

Education records
These are used primarily to see if the potential employee had graduated from high school (or a GED) or received a college degree, graduate degree, or some other accredited university degree. There are reports of SAT scores being requested by employers as well.

Employment records
These usually range from simple verbal confirmations of past employment and timeframe to deeper, such as discussions about performance, activities and accomplishments, and relations with others.

Financial information
Credit history, liens, civil judgments, bankruptcy, and tax information may be included in the report.

Licensing records
A government authority that has some oversight over professional conduct of its licensees will also maintain records regarding the licensee, such as personal information, education, complaints, investigations, and disciplinary actions.

Medical, Mental, and Physiological evaluation and records
These records are generally not available to consumer reporting agencies, background screening firms, or any other investigators without documented, written consent of the applicant, consumer or employee.

Military records
Although not as common today as it was in the past fifty years, employers frequently requested the specifics of one's military discharge.

Polygraph testing
Those seeking employment in the government relating in a field of national security, law enforcement, or other field of safety or security may look into a persons’ background not disclosed in applications. Those who fail a polygraph test may not be selected.

Social Security Number (or equivalent outside the US) A fraudulent SSN may be indicative of identity theft, insufficient citizenship, or concealment of a "past life". Background screening firms usually perform a Social Security trace to determine where the applicant or employee has lived.

Other interpersonal interviews
Employers may investigate past employment to verify position and salary information. More intensive checks can involve interviews with anybody that knew or previously knew the applicant—such as teachers, friends, coworkers, neighbors, and family members; however, extensive hearsay investigations in background checks can expose companies to lawsuits. Past employment and personal reference verifications are moving toward standardization with most companies in order to avoid expensive litigation.



Drug tests and credit checks for employment are highly controversial practices. According to the Privacy Rights Clearinghouse, a project of the Utility Consumers' Action Network (UCAN): "While some people are not concerned about background investigations, others are uncomfortable with the idea of investigators poking around in their personal histories. In-depth checks could unearth information that is irrelevant, taken out of context, or just plain wrong. A further concern is that the report might include information that is illegal to use for hiring purposes or which comes from questionable sources."
In May 2002, allegedly improper post-hire checks conducted by Northwest Airlines were the subject of a civil lawsuit between Northwest and 10,000 of their mechanics.
Some proposals for decreasing potential harm to innocent applicants include: * Furnishing the applicant with a copy of the report before it is given to the employer, so that any inaccuracies can be addressed beforehand; and * Allowing only conviction (not arrest) records to be reported.

In New Zealand, criminal checks have been affected by the Clean Slate Act 2004, which allows individuals to legally conceal "less serious" convictions from their records provided they had been conviction-free for at least seven years.
In Michigan, the system of criminal checks has been criticized in a recent case where a shooting suspect was able to pass an FBI check to purchase a shotgun although he had failed the check for a state handgun permit. According to the spokesman of the local police department,
... you could have a clear criminal history but still have contacts with law enforcement that would not rise to the level of an arrest or conviction [that can be used] to deny a permit whether or not those involved arrests that might show up on a criminal history.
Public records pay sites
Taking advantage of public records availability in the United States, a number of Web based companies began purchasing U.S. public records data and selling it online, primarily to assist the general public in locating people. Many of these sites advertise background research and provide employers and/or landlords with fee-based checks.
There has been a growing movement on the web to use advertising-based models to subsidize these checks. These companies display targeted ads next to the reports delivered to landlords or employers. Some of the reports provided by these pay sites are only expanded versions of a basic people search providing a 20 year history of addresses, phone numbers, marriages and divorces, businesses owned and property ownership. Usually, these sites will also provide a nationwide criminal report for an added charge.
As a general rule, employers may not take adverse action against an applicant or employee (not hiring or terminating them), solely on the basis of results obtained through a database search. Database searches, as opposed to source records searches (search of actual county courthouse records), are notoriously inaccurate, contain incomplete or outdated information, and should only be used as an added safety net when conducting a background check. Failure by employers to follow FCRA guidelines can result in hefty penalties in the U.S.

Laws on Background Checks
Some of the laws protecting both the employers and employees rights are- * US - Federal Fair Credit Reporting Act, 15 USC §1681, * California Investigative Consumer Reporting Agencies Act, California Civil Code §1786, * -------------------------------------------------
California Consumer Credit Reporting Agencies Act, California Civil Code §1785
Background Checks and Employment Laws in India
Certain instances have been noticed in India in the recent past, where employees have sought employment on the basis of fake educational qualifications or salary certificates. Even experience certificates are known to have been doctored.
In a recent incident, one employee questioned the right of his employer to verify his antecedents. His contention was that the employer had no right to peek into his past and look at what he was doing after work hours. The services of the employee were terminated for some reason. The employee approached the Police with a complaint that with verification of his antecedents, the company had committed certain offences under general law. The investigating officer of the Police Station questioned the authority of the employer to verify antecedents and closed the case as the application of employment of the Company provided for a clause of verification and the employment agreement also had a similar provision and the Company’s employment rules provided for authorization of verification by the employer. Various aspects of private investigation are put forward keeping the above case in mind.
Law as to privacy in India is not as stringent as it is in the United States of America or other countries. Prosecution for antecedent verification by an employee is a remote possibility in India and employment laws in India are generally silent on this issue. However, the Indian legal system is sometimes so flexible anybody can be prosecuted for anything though ultimately the prosecution will end up in acquittal.
Every employer has the right to examine the correctness of statements made in the employment application. Therefore an employer can safely verify antecedents of an employee as long as such verification is for employment purposes. The employer should provide specific clauses in application for employment and there should be specific term providing for such verification in the employment agreement or letter of appointment. The employment policy also should have specific provision stating therein that the Company has right to verify antecedents in order to maintain confidentiality of information as well as from the point of integrity of the organization. The elaborate provisions will help Company in case employee decides to question such a right.
The verification of antecedents or qualifications should be conducted through a reputed agency. There are instances when the agency has given wrong information.
In India surnames are identical and so are initials or even first names. In one particular case, the investigating agency committed a mistake and informed the Company that a person who was under investigation was not qualified. This was a mistake that took place due to confusion arising out of there being identical names. Therefore an employer should be very careful in verifying antecedents of an employee.
Antecedent verification is now not confined to only software or identical industry. In the recent past some of the manufacturing units while employing even workers have undertaken the exercise of antecedent verification so as to avoid having employees with a criminal background.
The investigators often post themselves in different positions in order to seek information. The private investigators have no powers like Police to investigate. The investigating agency shall therefore have to operate within the framework of law. The investigating agencies sometimes pose as customers and a host of other disguises to collect information. Such an act can attract provisions of the Indian Penal Code and the Complainant can also try to connect the employer as a person having common intention in committing such an offence.
This is a general note based on certain incidents and recent happenings and should not be construed as law. Every such case needs to be examined separately and from their respective legal angles.
Case Study: Preliminary Public Record Background Check Identifies Criminal Investigations
The Scenario: Diligentia Group was retained to conduct a background investigation on a native of South American who had spent more than 20 years in the United States working for an international investment bank. The candidate was being considered for a position at an international financial institution based in the United Kingdom. The client was in the early stages of conducting their due diligence on the candidate and requested a background investigation.
Given the timing of the negotiations, the client was hesitant to commit a significant amount of time and money to conduct a comprehensive background check in the multiple jurisdictions that the candidate had resided. However, given the significant financial commitment and potential risk involved to their reputation, the client requested some preliminary background searches on the candidate to identify potential warning signs. We suggested that client conduct a preliminary public record background check in the United States to determine if there were any potential issues that may exist.
Securities Regulator Records Discloses “Red Flags”: During the course of our initial investigation, a review of selective public records in the United States identified the following information through state securities regulators: * South American federal officials recently investigated three different investment banking transactions involving the candidate including an ongoing criminal probe by a South American federal prosecutor. * The candidate was terminated from his prior position at his former investment bank due to a “loss of confidence.” According to various published reports and information provided by the candidate to the client, the candidate had “retired” from his position at the investment bank. * The Securities and Exchange Commission and the U.S. Department of Justice had conducted an investigation into the candidate’s trading activities relating to two different investment banking transactions.

The Result: Given the information identified during the course of our preliminary public record background check, the client ultimately decided (to no surprise) not to proceed with hiring the candidate, potentially averting significant damage to the company’s business and reputation.

Business Background Checking – Best Practices
Background screening used to be a manual and time-consuming process conducted primarily by larger organizations. However, with the advent of affordable, user-friendly and compliance-driven on-demand screening solutions, more and small businesses are able to effectively leverage background screening to mitigate hiring risks and improve quality of hire.
To better understand how and why small businesses are conducting background screening, HireRight surveyed more than 600 small businesses across all major industries. The resulting 2011 Small Business Spotlight reveals four essential best practices for small businesses to help mitigate risk and improve quality of hire:

1. Put it In Writing
A written background screening policy is the backbone of a successful screening program. According to the Small Business Spotlight, 29 percent of small business employers plan to create an employment screening policy in 2012 and another 19 percent plan to draft a policy that specifically addresses drug, alcohol and health screening.
Background checking policies can help protect your organization in the event of a discrimination claim or regulatory audits. The policy should also set clear background screening procedures for human resources personnel.
In the policy, your organization may describe the employee background checks that might be conducted for various positions and how the screening results will be evaluated to make hiring decisions. To help mitigate the risk of potential discrimination claims, a best practice is to specify which roles or job titles may need additional background checks.
For example, a position that involves financial responsibilities may warrant a credit check, while an administrative role may not require it. To help ensure compliance, always have an attorney review your background screening policy.

2. Help Reduce Risk with Criminal Background Checks
According to the 2011 Small Business Spotlight Report, 88 percent of small businesses require criminal background checks as part of the background screening process. However, depending on the types of criminal background checks conducted, employers may still be exposed to risk.
While organizations that check a national criminal database will have access to a wide range of criminal record history, the data is not considered comprehensive and may not be up-to-date due to time lags between when offenses occur at the county or state level, and when they are reported to the national database.
To help ensure more comprehensive coverage of criminal records, organizations may consider conducting criminal background checks at the courthouses of the applicant’s counties of residence, work and education and surrounding areas, in addition to national background checks.
It is also recommended that organizations use both pre-employment background checks and ongoing criminal record checks for both regular workers and contingent workers.

3. Verify the Most Commonly Falsified Information
It’s not uncommon to find applications that contain an outright lie about experience, education and ability to perform essential work functions. Without verifying an applicant’s employment and education history, motor vehicle records and even credit history, organizations may be blind to crucial red flags or misinformation that could dramatically impact a hiring decision.
Checking employment and education history can help ensure that applicants really do meet your job requirements. For positions that involve driving or equipment operation, motor vehicle checks may help improve workplace safety and reduce liability risks.

4. Reassess Regularly
According to the Small Business Spotlight, in 2012, 44 percent of small business respondents plan to review their employee screening standards and another 15 percent plan to evaluate their non-employee screening standards. This means that more than half of small businesses are not regularly assessing their employee screening standards and that more than three quarters are not reviewing their contingent worker screening standards.
With ever-changing industry, state and federal regulations, organizations that do not re-evaluate their screening practices could face greater exposure to compliance and legal risks.
It is a best practice for small businesses to self-audit their background screening policy and program no less than annually. Organizations should also monitor changes in industry regulations and worker eligibility legislation that may affect their hiring process.
By reviewing these four best background checking practices, small businesses can help mitigate risks and improve the overall quality of hire.

Some Companies doing Background Checks for others in India: 1. IBC India: It is a background/antecedents verification company, specializing in the field of Employee Background Screening (EBS). Headquartered in Bangalore, with four other branches in India and several associates across the globe, IBC provides its services to Multinational, National companies & Individuals worldwide
Website: 2. National Skills Registry: Empanelled Background Checkers(EBC) are the entities empanelled by NASSCOM and NDML to render the services of checking the information registered by Knowledge Professional(KP) with National Skills Registry(NSR). These entities record the results of background check on the NSR system
Website: 3. Redfox Detectives, Ahmedabad: It does employee verification and employer can ask it pre offer or post offer
Website: 4. Cleves Research: They use PAN Card provided by India Income Tax Department and boast of quality in their investigation.
Website: 5. Probe Intelligent Services: It is a professional corporate investigations firm. The firm currently offers services throughout India. It offers Background Investigation Services in whole India. The firm specializes in the Pre-Employment Investigation. Additionally, they offer investigation of theft, dishonesty, and substance abuse in the workplace, litigation support and an assortment of products and books related to industry.
6. Corporate Investigations India: It does pre-employment screening and background investigations.

CONCLUSION: The need for background investigation is increasing with the increase in the number of people applying for a single job. Hundreds of applications and resumes are received and most contain some false or inflated information. Becoming entrusted with positions that deal with case, propriety data, private documents, etc entails dedication and very good track record of the person. Without checking the track record, it is not possible to trust the information of the organization to someone.
Since there is severe competitiveness in the industry, several applicants are not straightforward enough to put appropriate specifics about themselves. It has thus become very important to carry out background investigations before organizations hire and keep someone on job. Nowadays multiple investigations are done before a candidate is finally put on job so that complete record of the candidate is obtained. It has become so important that sometimes outside agencies are heavily paid and hired to carry out the investigations.

REFERENCES 1. 205sass_RetailersGuide 2. 3. 4. "BDO Fraudtrack 4 Report". Retrieved 2012-06-17. 5. "The Enemy Within". CIFAS. Retrieved 2012-06-17. 6. 7. "Annual pre-employment Screening Survey". Retrieved 2012-06-17. 8. "U.S Immigration and Customs Enforcement News Release". 2008-08-26. Retrieved 2012-06-17. 9. "Fair Credit Reporting Act". Retrieved 2012-06-17. 10. 11. 12. "Bellwether Settlement For $5.9 Million Given Preliminary Approval For FCRA Class Action Involving Criminal History Information: Workplace Class Action Litigation: Lawyers & Attorneys for Labor & Employment Law Litigation, Counseling, Employee Relations: Seyfarth Shaw LLP". 13. 14. 15. 16. 17. 18. 19.…...

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