A Strategy for Validating Background Checks Could Save Employers from Legal Exposure

Traditional strategies do not apply easily to criminal background checks, which could lead employers into trouble with the EEOC or plaintiffs claiming discrimination. A risk-based validation approach provides an answer. 

US employers’ widespread use of criminal background checks (CBCs) had received relatively few legal challenges until 2012. This changed when, given racial disparities pervasive in the criminal justice system, the US Equal Employment Opportunity Commission (EEOC) released enforcement guidance on CBCs’ potential to discriminate against certain racial minorities under Title VII of the Civil Rights Act. Several high-profile lawsuits and millions of dollars in penalties ensued.

Employers seeking to avoid financial and reputational damage will increasingly need to “validate” the use of CBC screenings in hiring procedures to demonstrate they are “job related… and consistent with business necessity.” Yet common validation strategies do not easily apply to CBCs. And since most cases involving these checks settle before going to trial, few published court decisions exist to offer guidance.

What can companies do to help validate CBCs and avoid legal exposure?

A primer on validation strategies: What they are, how they work and why CBCs present a unique challenge

There are two reasons to validate the use of a selection procedure. The first is to assess whether the procedure is accomplishing its intended goal of making better hiring decisions; the second is to meet the employer’s legal obligations when the procedure shows adverse impact—as may be the case for CBCs, due to their potential to disproportionately affect some racial minorities.

Validation is a common practice in personnel selection, and employers and testing professionals generally are comfortable using different strategies to validate their use of hiring instruments, such as job knowledge tests, employment interviews or work simulations. The two most common validation techniques are described below, along with unique challenges applying them in the context of CBCs.

• A content-oriented strategy is used to demonstrate a link between the content of the job and the content of the selection procedure. For example, if a multiple-choice job knowledge test is used, this strategy would measure the link between the test questions and the knowledge, skills and abilities (KSAs) underlying effective job performance.

  CBCs are seldom implemented to predict task performance, but instead to minimize risk (e.g., employees physically harming others or stealing from the company). Thus, a content-oriented strategy cannot be applied in the same way in this context.

• A criterion-oriented strategy is statistical in nature. Typically, it measures the relationship between scores on a selection instrument and of job performance. For example, a statistically significant correlation between interview scores and scores on a performance appraisal would be considered evidence of the interview’s validity for selecting employees.

  Applying this strategy in the context of CBCs also presents challenges: primarily that the behaviors the CBC is intended to minimize are both rare and serious when they occur. In other words, the incidence of an employee with a history of violence harming a customer may be highly unusual, but it is of great consequence when it does happen. Due to sample size issues, the infrequent nature of these events places significant limitations on the ability to measure statistical relationships. In addition, knowingly hiring individuals with certain criminal histories to see if they engage in similar acts in the workplace may put others in danger, and therefore raises ethical questions.

Employing a new, risk-based validation approach for CBCs

Given the limitations of traditional validation strategies, what are employers’ best options when using CBCs?

Professionals from BRG recently worked with a large retailer, designing a customized “risk-based” validation approach that combined the core elements of a content-oriented strategy but was flexible enough to apply to a CBC. Broadly, it involved two steps:

1. Identify job-related risk factors. In our risk-based job analysis, we reenvisioned a content-oriented approach: evaluating the work done by employees using job-analysis techniques to identify “risk factors” associated with that work rather than the KSAs needed to do it well.

   For instance: Do employees have exposure to cash and/or merchandise? Do they drive a vehicle? Do they interact with customers? Do they have access to sensitive information, such as credit card numbers or home addresses?

   Drawing on an extensive review of internal documents (e.g., job descriptions, training materials), interviews with district managers and in-person site visits, we identified eight such risk factors—factors that included direct interaction with customer and coworkers, and access to cash and company merchandise.

2. Link crimes to risk factors. The next step was determining which crimes had a clear and logical relationship with the risk factors found on the job. We did this by collecting data from a diverse group of subject-matter experts (SMEs) via structured interviews. Reading from a standardized script, the SMEs were asked to consider the nature of each crime and directed to indicate whether a clear and logical relationship existed between the crime and each risk factor identified.

   The process produced quantitative validation data, demonstrating that most crimes tested for were related to at least one risk factor (as unanimously stated by the SMEs). The results were also substantiated by external objective sources, such as the Federal Sentencing Guidelines and academic literature.

Adequate preparation today can reduce legal exposure tomorrow 

The vast majority of employers uses background checks in hiring. Yet despite recent EEOC actions, many are unprepared to provide validation evidence justifying their use.

Some may not even be aware that validation is an issue. Outsourcing background checks to a third party, as is typical, may diffuse a sense of responsibility and leave employers with a false sense of safety. Others want to be proactive and take preventative steps. They just don’t know how.

The risk-based validation approach uses proven validation strategies but applies them to CBCs. This technique enables business leaders to assess the effectiveness of their hiring procedures and gather data to protect the company in the event of a legal challenge—before it occurs.