Articles Posted in Employment

The NY Times reports on a bill introduced by Senator Elizabeth Warren that would bar most employers from requiring applicants to disclose their credit histories or otherwise disqualifying applicants based on poor credit ratings.

Employers are increasingly running credit checks on job applicants with the three national credit reporting agencies only too eager to add to their profits by selling credit reports to employers.

The problem is that research has proven that people with poor credit histories are not automatically poor job prospects. Plus, credit reports are not always accurate making the process even more unfair. A study of low- and middle-income families suggests that many applicants’ poor credit is a result of job loss in the recent depression or medical debts and not because of irresponsible behavior. Such debts do not reliably predict whether the applicant can satisfactorily handle a job.

A MSNBC report focuses on the problem of background check companies confusing one person with another with the result that applicants lose job opportunities.

MSNBC interviewed a Ms Catherine Taylor who the Red Cross wanted to hire her as an accountant. She was not hired after a Choice Point criminal background check came back with a rap sheet of drug felonies. The rap sheet was for a different Catherine Taylor who lived in another state. In another case, after Leonard Smith applied for a job, Sterling Information Systems confused him with a sex offender, who was in prison at the time.

A major problem is that background check companies rely on computers to match the data with no one checking to make sure the results are correct. The companies do not want to spend the money to ensure their reports are accurate. Incredibly, an industry representative said the error rate is less than 10% as if that were an achievement!

The Fair Credit Reporting Act requires companies to use reasonable procedures to assure maximum possible accuracy. The Act gives applicants the right to dispute inaccurate reports, but the problem is that by the time the dispute process is concluded some days or weeks later, the damage is done and the employer has hired someone else. Persons who lose job opportunities because of errors in background checks have a right to sue the background check company for damages.

Recently a woman was fired by her employer (Bain & Co no less) for having excessive student debt. She started a petition to Trans Union asking them to stop selling credit reports to employers.

The petition states that TransUnion, the world’s largest privately held credit reporting company, promotes credit history as a measure of character and suitability for employment. Some 60% of employers surveyed report they consult credit reports for job applicants, a practice that has left many qualified applicants out of work.

The reasons TU should stop this practice are as follows:

First, credit checks in hiring create a fundamental “Catch-22” for job applicants: applicants can’t pay their bills because without a job yet they cannot get a job because they cannot pay their bills.

Second, the use of credit in hiring discriminates against African American and Latino job applicants. According to one study, the average credit score of African Americans and Latinos is 5% to 35% lower than that of whites.

Third, credit history does not predict job performance. The definitive study on this issue, presented to the American Psychological Association in 2003, concluded that credit history does not correlate with employee conduct.TransUnion representative Eric Rosenberg has admitted: “At this point we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”

Finally, credit reports are inaccurate. A 2007 Zogby poll reported that 37% of people surveyed found an error on their credit report, and half of these respondents reported that they could not easily fix the mistakes.

To sign the petition, go here.

This month, the National Consumer Law Center issued a report on problems with companies that offer criminal background checks to employers. Over 90% of employers now run such checks on some employees and 73% run checks on all potential employees. The Internet has facilitated the means by which hundreds of companies offer criminal background checks using data purchased from cities, counties and states. One company’s website brags it has 345 million criminal records available. About sixty-five million adults in the US have some sort of criminal record.

The number one problem is that the data often has incorrect information leading to applicants unfairly being denied jobs. The report gives the example of a Samuel M. Jackson who was denied employment after a prospective employer ran an InfoTrack background check. InfoTrack reported a rape conviction from 1987—when Mr. Jackson was four years old. The rape conviction actually belonged to fifty-eight-year-old male named Samuel L. Jackson from Virginia, who was convicted of rape in November 18, 1987.

The Fair Credit Reporting Act (FCRA) requires background checking agencies to maintain procedures to ensure the accuracy of information they report about consumer. Unfortunately, the FCRA is not being very well enforced as against background screening companies. The companies continue to routinely make mistakes with grave consequences for job seekers.

Here are some of the errors the background companies make:

• Mismatch the applicant with another person;
• Report sealed or expunged information;
• Omit information how the case was resolved;
• Include misleading information; and
• Exaggerate the seriousness of the offenses reported.

One reason for so many errors is that the companies buy the data in bulk form and then fail to verify or update the information. Another is they use unsophisticated matching criteria. Yet another is they fail to use all available information to prevent a false positive match.

Persons who were denied employment because of errors in background checks have remedies under California and federal laws. California has one of the better laws to protect consumers. The laws provide for damages and attorney’s fees.

Responding to complaints that employers were unfairly using credit reports to screen out applicants for all sorts of jobs, the California Legislature enacted a new law effective January 1, 2012, prohibiting employers or prospective employers from using consumer credit reports for employment purposes unless the persons are applying for managerial or law enforcement positions or for jobs that involve handling money or having access to more than $10,000 in cash. The bill is AB 22.