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Compliance is Essential in Pre-Employment Screening

Compliance is Essential in Pre-Employment Screening

From a worker who is unqualified for the job to an employee who steals from the office, bad hires are potentially costly. How much so? According to the U.S. Department of Labor, the price tag on the average bad hiring decision is equivalent to 30 percent of the individual’s first-year earnings. Fortunately, careful pre-employment screening can go a long way towards ensuring only quality professionals join your team—but the process has to be compliant. Consider the following background check mistakes that can take a big bite out of your business bottom line.

Failure to Request Permission to Run a Credit or Background Check

Under the Fair Credit Reporting Act (FCRA), employers must obtain jobseeker approval before accessing credit, criminal or other records as part of a background check. Titled “A Summary of Your Rights Under the Fair Credit Reporting Act,” a new version of this document was released by the Consumer Financial Protection Bureau in early 2013. Some employers have already been subjected to multi-million dollar lawsuits for using the old version of the document. Failure to obtain written permission at all carries a penalty of $2,500 per violation.

Failure to Send Adverse Action Notices

The FCRA also requires employers to notify jobseekers in writing if they intend to take “adverse action” due to the information a credit or background check reveals. In the case of a job application, adverse action means employment disqualification. The employer must provide jobseekers with both pre-adverse action and post-adverse action notices that include the contact information for the credit or background check company and advises them of their rights to dispute the accuracy or completeness of the information. In 2009, the Federal Trade Commission took action against two freight services companies that rejected applicants based on background checks without informing them of their FCRA rights. The companies paid $77,000 in fines.

Rejecting All Convicts and Felons

In 2012, the Equal Employment Opportunity Commission (EEOC) issued guidelines to employers for use of the information obtained through criminal background checks. To avoid potentially discriminatory hiring practices, the guidelines encouraged businesses to consider factors such as type of crime, whether it was an arrest or conviction, and how long ago it occurred before denying an applicant employment. Earlier this year, Pepsi Beverages agreed to pay $3.13 million after an EEOC investigation revealed the company’s criminal background check policy discriminated against African Americans.

Failure to Conduct a Thorough Background Check

Conducting an incomplete background check—or failing to verify a jobseeker’s background at all—can expose your business to a negligent hiring lawsuit should the new employee endanger or injure another worker. According to the U.S. Department of Labor, assaults and violent acts accounted for 18 percent of business fatalities in 2009. Should an employee, client or vendor sue your organization as a result, the National Institute for Prevention of Workplace Violence reports verdicts in favor of the plaintiff have been as large as $40 million.

If you’re concerned that your pre-employment screening policies may not comply with current state and federal laws, consult your legal advisor or a human resource professional.

 

 

What to Watch for: Questionable Claims

What to Watch for: Questionable Claims    

Questionable claims are worker’s compensation claims insurers refer to the NICB for closer review and investigation because they appear to be fraudulent. According to the NICB’s analysis, insurers reported 3,474 claims as questionable in 2011. That number continues to increase based on data analysis of the first six months’ reported questionable claims.

Insurers may choose to refer a worker’s compensation claim to the NICB as questionable for several reasons. However, according to the recent report, the three most common are claimant fraud, prior injury/not related to work and malingering. These reasons topped the list in 2011, 2012  and 2013.

Claimant fraud is a very broad category that includes knowingly making false worker’s compensation claims, faking or exaggerating injures, filing multiple claims and failing to report income from second jobs. An insurer may select prior injury/not related to work if he believes an employee’s injury occurred prior to obtaining employment or was sustained while off the job. He might select malingering as a reason if he believes the employee is faking or exaggerating symptoms in order to continue collecting benefits after recovery from a legitimate injury.

While employers in big states like California, Illinois and New York suffered the most questionable worker’s compensation claims in total, the rankings changed when the NICB considered claims per 100,000 residents. When analyzed in that way, Delaware topped the list in 2011, Connecticut ranked first in 2012, and Maine led the pack in 2013.

Be prepared:

Consider these three warning signs that may help you spot questionable worker’s compensation claims before they are filed.

  1. Absence of witnesses. An employee attempting worker’s compensation fraud may claim his or her accident occurred when no one else was around.
  2. Monday injuries. Unlike a mid-week injury, it’s possible an accident reported on a Monday may have actually occurred over the weekend.
  1. Repeat claims. One study indicated that 37 percent of employees who filed one worker’s compensation claim would eventually file another.

According to the NICB, worker’s compensation fraud accounts for one out of every four insurance fraud claims in the U.S., costing employers billions of dollars each year. Consult with your insurance professional about ways you can protect your business from questionable worker’s compensation claims.