It is any staffing firm’s worst nightmare – getting a client sued over sloppily conducted background checks. This is exactly what happened to Staff Management Solutions LLC (SMX) in April 2015. Its major client – the retail giant Amazon – was slapped with a class action. The root of the class action was a background check carried out by SMX in 2013.
The case. While recruiting staff for an Amazon warehouse, SMX had interviewed an applicant called Gregory Williams. Extremely impressed by his performance, the staffing firm promised to hire him. However, this decision was later reversed when the applicant’s background check report revealed a felony conviction.
It later turned out that the felony conviction revealed in the background check was false. Mr. William’s background had no criminal record. Unfortunately, by the time the mistake was realized, the application process had been closed. Feeling rightfully aggrieved, Williams called his attorney and sued both Amazon and SMX for violating the Fair Credit Reporting Act (FCRA).
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Lessons. Although SMX conundrum is quite unique (it is the first staffing company to get a client sued over its background checks), the issue of background check inaccuracy is nothing new. Numerous companies have been sued for making decisions based on erroneous background check reports. Some have even paid out millions in settlements (although no staffing firm has felt the financial repurcussions of inaccurate results yet).
In fact, background checking companies have also been fined over producing inaccurate results. In October 2015, the Consumer Financial Protection Bureau (CFPB) fined two companies a total of $13 million for producing inaccurate results.
The CFPB had found that General Information Services (GIS) and its affiliate, backgroundchecks.com delivered the wrong results. The agency found that in 70% of the cases where the results were disputed, a second background check produced different results. This means that GIS wasn’t verifying its background check reports.
Such scenarios should be a reason for staffing firms to pause and think. If even a background check company can get sanctioned over inaccurate results, then staffing firms cannot take it for granted that they will receive accurate results. They have to take measures to ensure that they recruit reputable background checking agencies.
The best criterion for ensuring this is using NAPBS accreditation. The NAPBS (National Association of Professional Background Screeners) is the body dedicated towards promoting best practices in the industry. Its accreditation is considered the gold standard in background checks.
In fact the NAPBS Accreditation standards are so high that only 62 of the 700 NAPBS member companies have received the accreditation in the United States. Therefore, hiring an NAPBS accredited company is the surest way of guaranteeing the accuracy of background check.
However, accuracy is just one aspect of great background check reporting (although clearly one of the most important). A good quality background check report should also be clear, concise and easy to follow. Whoever reads it should be left with no doubt as to the type of checks, where they were carried out and the findings. For instance, a good criminal background check report should indicate the sources of information (e.g. criminal databases, court records, etc), dates searched, results and relevant comments.
The bottom line is that staffing companies shouldn’t assume that any screening company can supply them with quality background check reports. They need to carry out their due diligence to ensure that they select the best companies. A good criterion is to find companies which are NAPBS Accredited. After finding such companies, they should check out the quality of their reports by asking for a sample and have them demo the process.
A staffing firm that doesn’t take such measures may inadvertently set both itself and its clients up for costly lawsuits. In most cases, facing a lawsuit is something most firms may be able to weather. However, getting a client sued is another matter altogether. The reputational damage can prove extremely costly. After all, few clients will take on a staffing company which they know may get them sued.
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