Due Diligence is Performed to Tick the ‘Background Check’ Box Off the List
Although most employers and investors require a background check for legal and compliance purposes, the due diligence process is actually much more than just a company policy. It ensures the safety and security of individuals both in the workplace and for clients, to preemptively avoid cases of sexual abuse or questionable behavioral conduct. Furthermore, a background check ensures the candidate is qualified for the job and is the right fit for the corporate culture. In terms of investment opportunities, a background check assures investors that their allocation of capital will be transferred to and handled by safe hands.
Due diligence, when conducted thoroughly and accurately, can reveal the subject’s character and thus can help employers or investors decide whether they want to take the next steps or terminate the relationship. For example, a person under review who has fabricated his years of education at a certain academic institution not only reveals that he is clearly not qualified for the job, but also that his honesty and integrity are a big question mark.
In addition, investing in due diligence beyond the minimal requirements can save employers from financial failure. According to a 2015 survey, forty-six percent of all new hires are considered failures by the eighteen-month mark. Furthermore, the U.S. Department of Labor noted that the cost of a bad hire can reach up to thirty percent of the employee’s salary or an average of $14,900 per bad hire. So take the time before you tick the box—it could be the impetus for your success or your consequent failure.
Background Checks Just Ensure Employers Don’t Hire Candidates With A Criminal History
While this statement is false, it carries some aspects of truth to it. Background checks do ensure that employers don’t hire candidates who can be potential threats to the safety and security of employees and/or clients. But criminal history is not the only thing that background checks look for. Additionally, even criminal records do not always carry significant weight in terms of considerations for hiring. In fact, a great deal of legislation has been passed to ensure that ex-cons do not have the shadow of their past weighing them down.
While criminal backgrounds are one component of the due diligence process, employers and investors also look for things like credit history, civil lawsuits, and education and employment verification, among others to validate a job applicant or investment opportunity. This information is then used holistically to evaluate the compatibility of the candidate. So a candidate may have a completely clear criminal record and yet may still not be hired for the position or given the investment opportunity based on additional pieces of information discovered during the due diligence process.
Furthermore, candidates are not automatically denied employment opportunities because of their criminal histories. There are various relatively new laws, policies, and movements that have pursued employment protection and fairness for those who have allegedly committed a crime and are looking to enter the workforce as contributing citizens. One movement, Ban The Box, strives to create equality for all, specifically ex-convicts, in the workplace. Adopted in thirty five states and over one hundred and fifty cities across the U.S., the movement is gaining traction and is creating real changes in the industry.
Once You Run a Background Check On Someone, You Never Have to Run One Again
False. An initial background check on a job candidate or investment opportunity is necessary. However, the due diligence doesn’t (and shouldn’t) end there. After an employee is hired or an investment opportunity is undertaken, companies should perform continuous checks or refresh reports to ensure that the employee has maintained his/her ‘clean’ status from the commencement of his employment contract or investment. John may have been clean when you hired him, but he could have committed a crime anytime during his employment that the employer would be completely unaware of if not for another refresh check.
Specifically in regards to pre-hiring, the repercussions of failing to perform continuous background checks are evident with the widespread number of lawsuits that have been brought forth over the past few years against mega brands such as Wells Fargo, Facebook, Amazon, and the list goes on.
Take, for example, the well-known ride-sharing service, Uber. CNN reported that, to date, there have been one hundred and three charges of sexual assault, misconduct, and abuse brought forth by riders against drivers. Uber and Lyft had performed initial background checks on their drivers but had not performed additional monitoring of their drivers. Lyft, which followed Uber’s footsteps, has since implemented continuous background checks and an enhanced identity verification process for drivers.
Evidently, running refresh reports or continuous monitoring is the flagrant solution to this straightforward problem. Performing a background check takes a snapshot of information that is captured only at one point in time. That information may provide you with the tools needed to make business decisions at one specific moment, but it doesn’t allow you to make continuous optimal decisions because the only constant factor about information is the fact that it’s always changing.
The Background Check Process Hasn’t Really Changed Throughout The Years
The first recorded case of negligent hiring law occurred in 1908 when an apprentice accidentally killed a fellow employee in a prank gone wrong. This case became a catalyst for businesses’ accountability for employee’s actions both on and off the job. By the 1970s, running background checks on job applicants became the industry norm as more employers were being held liable for negligent hiring. But the background checks of the past are most certainly not the background checks of today. While the underlying principle of conducting due diligence has not changed, everything else essentially has. A background check’s content, format, collection and administration method, and context have all drastically changed the past few decades, especially due to technological advancements and the proliferation of data.
One notable development in the timeline of background check history is the 1970s establishment of the Fair Credit Reporting Act (FCRA). The purpose of the act was to create fair and accurate background checks and consumer reports. The FCRA shapes the way employers can ask for, receive, and use background checks from third-party vendors. The act outlines employee and job applicants’ rights including “the right to know what is in your file,” “giv[ing] your consent for reports to be provided to employers” and “the right to dispute incomplete or inaccurate information.” The FCRA applies to all fifty states in the U.S., however, each state has the right to apply its own employment laws over and above the laws outlined in the act.
The FCRA’s goal of protecting employees in the workplace was not a vision of the past. Corporations who violate the rules and regulations under the FCRA are held liable to the highest degree. For example, over the past ten years, employers and screening firms have had to pay more than $325 million to settle background check (or lack thereof) lawsuits.
Another development in the progression of due diligence on the technological front is the use of artificial intelligence and machine learning to conduct due diligence. AI has capabilities far beyond human intellect, such as being able to collect data from thousands of sources across the web simultaneously, aggregating the results, and analyzing the data to interpret the meaning behind the information. The depth and scope provided by AI systems are incomparable to that of human capacity and thus are revolutionizing the industry.
Lastly, we can’t forget that content is king. Especially when it comes to background check reports which try to find all the available information about a candidate to evaluate their eligibility. These days, applicants may as well call themselves open books because the content available about them today, specifically with the proliferation of social media, is dynamically more far-reaching than ever before. With the click of a button, employers and background check providers have a wealth of information at their fingertips that, yes it’s hard to believe, didn’t exist only a few years ago. However, with this wealth of information also comes a wealth of regulation and speculation that is still so new in this data-driven era.
Get the Facts Straight… Before It’s Too Late
The world of background checks and due diligence, although simple in nature, can be confusing and esoteric to the average person responsible for completing one. While the laws may be clearly outlined in terms of what not to do, the unwritten rules about what to do can be overwhelming to say the least. That’s why it’s important to take the time to understand what information is true and what information is posed with underlying ulterior motives. Especially in the world of pre-hiring and pre-investment where everyone is looking to gain a competitive edge in this crowded marketplace, people may lie—but facts never do.