For companies that connect the right workers with the right employers, background checks are crucial. But with rapid developments in data sharing, the brokers that sell data to background check firms now update more than one billion pieces of data every month. That’s one billion opportunities for typos, technical glitches and other errors that can deprive workers of job opportunities and create legal liability for background check firms, other verifiers and employers.
In turn, the past decade has seen an explosion of litigation under the Fair Credit Reporting Act (FCRA), which empowers people to resolve errors in credit reports and background checks, among other provisions. The number of FCRA lawsuits has nearly tripled since 2011, reaching 5,400 suits in 2021. Meanwhile, background check-related lawsuits have forced companies like Aerotek, Kelly Services, AT&T, Home Depot, and Whole Foods to pay more than $325 million in settlements. As just one example, Starbucks recently settled lawsuits alleging the company used flawed data from background checks to deny work to thousands of jobseekers.
Yet there is little reason to think employers have become less concerned for their workers. Rather, the broker-centered verification system has simply dominated the US workforce for decades, and it has become normal for employers to hire background check firms that buy their verification data from brokers like Equifax or Experian, which collect and sell billions of records on workers’ income, education, employment and more. Some verification firms are even subsidiaries of the brokers themselves. For instance, Equifax’s The Work Number service collects payroll data on more than half of the entire US workforce.
Unfortunately, this system creates enormous risks for both workers and employers. Beyond the threat of data breaches — like the infamous 2017 hack at Equifax — or the fact that brokers re-sell worker data to countless buyers, it is incredibly easy for data errors to go undetected when workers are not included in their own verification process. Where data brokers assume there will always be errors across the billions of records they process, mistakes like inaccurate criminal histories, missing jobs and even small misspellings will be obvious and urgently important to the workers involved. And where 78% of employers aim to offer identity theft prevention as a worker benefit, employers can avoid all the added costs of this benefit if their workers can simply review their data and flag any anomalies.
This verification system is outdated and inefficient, and it treats workers like products rather than clients or consumers. Meanwhile, Equifax raised the price of its employment verification by 31% in the past year, passing these costs to job seekers, home buyers and staffing firm customers.
However, new technologies are emerging that allow workers to take control of their own payroll data, offering personal, encrypted vaults to store their data, review it for accuracy and share it with specific third parties with the knowledge that the authenticity of their data is guaranteed.
Regardless of the specific technology, it is critical that employers explore these new platforms. Beyond legal liability, mistakes in payroll data can devastate workers, ruin job opportunities and damage relationships with employers. For instance, the world recently learned Apple labeled former employees as “associates,” regardless of their title. Since these workers did not verify their own records, some were shocked to learn this error had derailed other job offers. Moreover, taking a bold step to protect your workers’ data can signal to your clients that they can entrust their own sensitive data to your company and your contractors.
To avoid litigation, PR crises, worker turmoil and corporate distrust, experts urge employers to arm themselves with policies, documentation and redundant compliance measures. And while these are good precautions, they can never fully shield a company that relies on data from massive brokers to vet their workers.
There was certainly a reason employers relied on data brokers in the past, but things have changed. Laws and technologies are shifting, leaving employers with a choice: Stick with the old system and do your best to defend against liability, breaches and distraught workers, or cut out brokers as middlemen and give workers a voice in their own employment story.