The Trouble with Background Checks

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• Background Checks: What You Need to Know

Theron Carter's name was cleared. Yet "no one will hire me," he says Matthew Gilson

ChoicePoint's Bryant and Whitford: Striving for accuracy Mark Anderson

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com/research/stocks/snapshot/snapshot.asp?symbol=HIRE'>HIRE), based in Irvine, Calif., reported that earnings jumped 44%, to $9 million, last year on revenues of $69 million. To grab a piece of this growing market, Reed Elsevier Group (RUK), the Anglo-Dutch information provider, agreed to acquire ChoicePoint for $4.1 billion in February—at a 50% premium to its stock price.

Industry surveys show why Reed Elsevier was eager to expand its screening business. In a 2004 study by the Society for Human Resource Management, 96% of personnel executives said their companies conduct background checks on job candidates, up from 51% in 1996. Two-thirds of larger companies say they outsource screening, and many now vet current employees in addition to applicants.

Screening often goes far beyond the familiar checking of public criminal records. For $60 to $80 per applicant, ChoicePoint and its rivals assemble digital dossiers of educational degrees and credit histories as well as interviews with friends, past bosses, and colleagues. Call-center workers wearing headsets inquire about work habits, personal character, and drug or alcohol problems. Just by dint of their heft and permanence, the proprietary data caches they compile can seem authoritative, even though the information sometimes contains errors, innuendos, or outright falsehoods.

"You won't believe what people tell you," says Mary Beth Gotshall, who has done interviews since 1999 at Employment Background Investigations, a midsize firm in Owings Mills, Md. She and colleagues have collected comments from a father who said he would never rehire his son because he had missed so much work at a family business. Another former boss accused an applicant of stealing and demanded Employment Background help find him. (The firm declined.) "We put everything in there," Gotshall says while juggling employment checks for retailer Ikea, a Pittsburgh medical clinic, and a Texas engineering firm. Her boss, Richard Kurland, chief executive of Employment Background, says the company goes to great lengths to be accurate. "We have a huge responsibility to mankind," he adds.

But Lester Rosen, a veteran in the industry and president of Employment Screening Resources in Novato, Calif., says: "Essentially, it's the Wild, Wild West. It's an unregulated industry with easy money and not a huge emphasis on compliance or on hiring quality people" to do the screening.

Theron Carter, a 61-year-old unemployed truck driver in Middleville, Mich., is waiting for his name to be cleared in a database used widely in the transportation business. In May, 2006, a U.S. Labor Dept. administrative law judge ruled that Carter was wrongly terminated by Marten Transport (MRTN) for making legitimate complaints about the safety of his 18-wheel truck. He had hauled loads for the Mondovi (Wis.) company for only two weeks before being fired in June, 2005. The judge awarded him more than $31,000 in damages and back pay and ordered Marten Transport to delete "any unfavorable work record information" in a report compiled by USIS, a large screening company in Falls Church, Va. Once an arm of the federal Office of Personnel Management, USIS was privatized in 1996. It still screens government workers and runs an employment-history database used by 2,500 transport companies called Drive-A-Check, or DAC.

Despite his legal victory, Carter's DAC report still says Marten Transport dismissed him for "excessive complaints" and a "company policy violation." "No one will hire me," says Carter, who withdrew $50,000 from retirement savings to support his wife and himself. Trucking company J.B. Hunt Transport Services (JBHT) "told me I had excessive complaints and wouldn't hire me. I told them I won my case." Hunt declines to comment.

Marten Transport has appealed the Labor Dept. ruling.