- Federal Agencies Increase Focus on Background
As 2022 wound down, several federal agencies issued guidance and policy regarding background checks, privacy, and data signaling a renewed interest in further regulating background screening in 2023 and beyond. The Consumer Financial Protection Bureau (CFPB) has been focusing on “big tech” and its use of consumer data, as well as the Fair Credit Reporting Act (FCRA). The CFPB has taken steps toward implementing Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which would expand their regulatory reach over additional types of companies. This extended reach would impact the FCRA, as additional, and possibly burdensome, requirements would be made on both the furnishers and the users of data. The CFPB has also collaborated with the Federal Trade Commission (FTC) regarding the FCRA and their interpretation of its provisions.
Further, the White House released guidance in 2022 called Blueprint for an AI Bill of Rights regarding the use of Artificial Intelligence (AI) in the hiring process and in other areas. The guidance covers five principles: Safe and Effective Systems, Algorithmic Discrimination Protections, Data Privacy, Notice and Explanation, and Human Alternatives, Consideration, and Fallback. While this publication is not yet law, employers and others who rely on AI for hiring should examine their systems for systemic bias or discrimination. The Equal Employment Opportunity Commission (EEOC) has also issued guidance regarding the use of AI and its interaction with the Americans with Disabilities Act (ADA) compliance. Employers who use AI in hiring should review their process to ensure that they are not running afoul of ADA compliance.
- Compliance Challenges Increase with Patchwork of State and Local Laws
Reconciling various state laws with impacts on employment policies and procedures (along with nuances within those laws) is becoming increasingly challenging for employers. What applies to one state doesn’t necessarily apply to another in more ways than one, including the availability of personal identifying information, the accessibility of criminal information, the legality of marijuana, and the determination of former compensation. This “patchwork law” trend increased in 2022 and is expected to continue throughout 2023.
For example, Colorado’s broad new Clean Slate law went into effect last year, while Connecticut’s and Michigan’s laws both go into effect in 2023. These laws automatically seal certain criminal records, but the details can vary greatly. Missouri and Maryland both legalized recreational marijuana in 2022. And New York, New Jersey, Oregon, Virginia, California, Westchester County (NY), the city of Ithaca (NY), and New York City all have new pay transparency laws. It is expected that we will see similar laws to all of these enacted throughout the country in 2023, rendering compliance a top priority for employers.
- Background Screening Increasingly Impacted by Privacy Laws
Data privacy will continue to be a concern for employers in 2023. With no comprehensive federal privacy law, states are taking privacy into their own legislative hands. California’s broad new law, the California Privacy Rights Act (CPRA), which further expands the California Consumer Privacy Act (CCPA), is now effective, as of January 1st. Additionally, the Virginia Consumer Data Protection Act is now in effect, also as of January 1st, requiring businesses to take reasonable steps to protect consumer data privacy, confidentiality, and integrity. Further, the CFPB is increasing its focus on potential misuse and abuse of personal financial data. It is stressing the importance of data security measures, including multi-factor authentication, adequate password management, and timely software updates in maintaining data security online.
In 2023 and beyond, employers must remain diligent regarding state developments to ensure their own privacy policies and procedures remain in compliance. Additionally, those that use a consumer reporting agency for their background screening services should prioritize partnering with one that has achieved accreditation with the Professional Background Screeners Association (PBSA) Background Screening Credentialing Council (BSCC). The Background Screening Agency Accreditation Program (BSAAP) standard, policies, procedures, and measurements are available at http://www.pbsa.com.
- Courts Limiting Information Heightens Likelihood of Confusion in Screening Process
Along with the Clean Slate laws that several states have enacted, courts have also made it more difficult to search for criminal records. Several courts across the country, including courts in California and Michigan, have removed identifiers from records. This alarming trend restricting access to information typically used by employers in the hiring process will increase in 2023. But it isn’t merely about criminal convictions or giving people a second chance. Rather, it’s impacting the entire background screening process by eliminating the personally identifiable information (PII) used to determine if the record even belongs to the applicant involved in the first place. This makes it extremely difficult, if not impossible, for background screening companies to quickly and efficiently provide complete, accurate, and thorough reports. Background checks are also taking longer to verify the applicant’s identity. Further, this increases the potential for applicants to be denied employment based on confusion surrounding the results.
An increased risk of misinformation is contrary to the intent of these laws to protect the public. And ultimately, eliminating this information should not be necessary. The background screeners who use it most are highly regulated by the FCRA, which is overseen by both the FTC and the CFPB. We expect industry groups, like the ), to remain active in advocating for proper access to public records, especially concerning the impacts on the employer’s rightful use of them. Measures to protect consumers and applicants must be balanced with the legitimate need to protect employers, landlords, and others.
- Marijuana Laws Continue to Affect Employers
Marijuana was front and center at the mid-term elections last year, as several states included recreational marijuana on their ballots on November 8th. And while Arkansas, North Dakota, and South Dakota voters rejected their ballot initiatives, both Missouri’s Amendment 3, otherwise known as Legal Missouri 2022, and Maryland’s Question 4 secured voter approval. Missouri’s law went into effect 30 days after the election and Maryland’s will go into effect July 1, 2023. Under both laws, adults aged 21 and over are legally permitted to possess marijuana. Both also include processes for expunging certain marijuana convictions, another new trend.
While marijuana remains a Schedule I substance under the Controlled Substance Act (making it illegal for any reason under federal law), to date, nearly all the states have some form of law legalizing marijuana, with each of these laws having their own nuances. How these laws will impact employers and testing for marijuana, including accommodations for marijuana use, drug-free workplaces, and laws against testing for marijuana is still being worked through. With more remote workers (some in states that differ from the employer’s state), uncertainty regarding marijuana will continue. These issues will frustrate employers well into, and beyond, 2023.
- Staffing Challenges and Remote Work Impact Screening Standards
The Great Resignation continued throughout much of 2022, with an estimated 20% of workers quitting their jobs last year alone. 2022 also saw the emergence of the Quiet Quitting movement, where workers proudly demonstrated doing the bare minimum to keep their jobs—nothing more, nothing less. With employers challenged to find new employees quickly and easily, many mistakenly began relaxing their background screening standards. From not conducting background checks at all to only conducting them on certain employees to minimizing searches (when the government is already significantly limiting available information), employers are putting themselves at an even further disadvantage in finding the right person.
In 2023, we’ll continue to see a rise in a remote workforce. Hiring remotely can help your recruitment and retention efforts, but it does also have an impact on background screening. Employees who have staff in multiple locations do face additional hurdles in what can or cannot be included in a background check due to state and local laws. We will likely continue to see the larger implications of making hiring decisions without having a complete picture about who the employer is hiring. We expect that as the year progresses, employers will begin to revisit their hiring policies, including background checks, to ensure their standards remain where they should.
- Criminal Justice Reform Impacts More States … and Employers
All the laws to significantly limit the amount of information from a background check that employers can actually use are being passed at a time when crime is on a drastic rise throughout much of the country. Both California’s and Connecticut’s Clean Slate laws went into effect on January 1st, while Michigan’s new law is set to take effect on July 1st of this year. These laws severely limit the amount of information a prospective employer can consider upon hire—and these are just a few of many new laws limiting (or eliminating) access to information across the country. Delaware also enacted mandatory automatic expungement (or “Clean Slate”) by August 2024. Colorado passed similar legislation, becoming the seventh state to do so, joining Connecticut, Delaware, Michigan, Oklahoma, Pennsylvania, and Utah.
With increased frustration, employers are realizing that with crime rates up and new ways to defraud unsuspecting consumers and companies, background checks are more important than ever. Simply, they need to know who they are hiring. And employers are finding that a criminal background check is no longer enough to do so. In 2023, more employers will likely continue to opt for more comprehensive background check packages, including Social Media Checks, News and Publications, Employment Verifications, and Professional References to learn as much information about their applicants as legally permissible.
- Applicants Continue to Want More Out of the Hiring Process
As demonstrated by the new dynamic in the workforce that has been played out over the past two years, there has been a considerable shift in the mindset of millions of applicants and employees. How they view their jobs, their careers, their family time, and overall personal and professional priorities has changed. Both job applicants and current employees went from wanting something more fulfilling in years past to now demanding it. And they want these expectations to be met not after they are hired, but before, and through, the entire recruiting process.
More employers will look at this as an opportunity for a strong competitive advantage in 2023. With a well-developed and expedient hiring process, including background checks, employers can provide the solutions applicants want—a fast process, mobile availability, augmented technology, and customization. By making the hiring and onboarding processes essential components of the overall candidate/employee experience, they will meet those increased expectations from the start of the relationship.
- Increase in Discrimination Cases Based on AI in the Hiring Process
Social media isn’t the only place AI is making a known impact. It’s also being used extensively in the hiring process. While the use of AI can be helpful in the evaluation of prospective employees and their resumes or applications, it also presents challenges with regard to the potential for discrimination. With lawsuits being brought against employers, the Equal Employment Opportunity Commission (EEOC) took a stance on the issue with a technical assistance (TA) document last year. The TA addresses how existing ADA requirements may apply to the use of AI in employment-related decision making and how the use of these tools may create disadvantages for job applicants and employees with disabilities.
The TA also details various instances of the use of algorithmic decision-making tools regarding the ADA in general, reasonable accommodations, screening out qualified individuals with disabilities, and medical examinations. Also provided are recommended practices for employers to help with ADA compliance when using AI decision making tools and tips for both job applicants and employees who think that their rights may have been violated. AI will continue to be an issue for employers in 2023.
- Pay Transparency Laws Alter Verifications of Prior Work History
Pay Transparency was a hot topic in 2022 and we expect it to be even hotter in 2023. We saw a massive increase in Pay Transparency laws being implemented or becoming effective throughout the year and across the country, including New York, New Jersey, Oregon, Virginia, Westchester County (NY), the city of Ithaca (NY), and New York City. Most recently, California’s new Pay Transparency law went into effect on January 1st.
Further, while Colorado’s law has been effective since 2021, 2022 saw increased enforcement of its provisions. The Colorado Department of Labor and Employment notified hundreds of companies regarding violations and is now issuing fines for noncompliance. We also saw employers attempting to find ways around the limitations imposed by these laws. In New York, some employers posted huge salary ranges to meet the letter of the law … but not the intent. Other employers are avoiding posting jobs all together by increasing their use of third-party recruiters.
These Pay Transparency laws are also impacting how employers use verifications of an applicant’s prior work history. At a time when employment verifications are increasing due to limited criminal information being accessible, in some cases, employers are also now not able to verify what a prospective employee was compensated in the past. Unfortunately, these issues will continue to plague employers in 2023.
Hire Image strives to be your trusted background screening resource and partner in 2022 and beyond. If you have any questions about these predictions or your own background screening processes, please reach out at firstname.lastname@example.org.