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True Cost of Background Checks

All of Us or None v. Hamrick

In May 2021, the appellate court in California ruled in All of Us or None v. Hamrick that trial courts in the state cannot allow the public to search their online databases by date of birth or driver's license number, in part because doing so allows unauthorized access to an individual's compiled criminal history information. According to the background check industry, a number of large California counties responded to the ruling by removing date of birth searches from their public websites and terminals. The industry claims that, as a result, "lawful background check activity is crippled in these jurisdictions, which in turn is causing massive delays in getting people hired and working."

The background check industry is fighting the ruling. It asked the California Supreme Court to review the ruling, and the Court gave itself additional time to decide whether to review it. (EDIT: The Court subsequently denied review.) The industry's trade organization, PBSA, also asked the California Judicial Council to change the relevant rules of court to allow an online search by date of birth. The PBSA website prominently features this lawsuit (and a similar proposed change in Michigan) at the top of every page, urging its members to stay informed.

Cost of "Accurate" Background Checks

At first, the industry's response seems disproportionate. To understand them, it helps to know something about the Fair Credit Reporting Act. The FCRA requires that background check companies "maintain reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates." 15 USC 1681e(b). When a background check company (called "consumer reporting agency" under the FCRA) mixes up information belonging to two or more different individuals, the result is called a "mixed file." Mixed files are a major problem for background check companies because they expose them to liability for damages in the form of lost wages, reputation, and emotional distress and, sometimes, even punitive damages when a person is denied employment because of a mixed file. To prevent this, background check companies match files by name and one or more additional identifiers, such as date of birth and driver's license number.

If you have seen the kinds of documents maintained by a criminal court in California, you might still wonder what the big deal is. A case docket almost always contains multiple documents containing the individual defendant's date of birth, driver's license number, or social security number. Anyone can pull a case docket and match the case to an individual by name and any of the additional identifiers. What's missing here is the typical background check company's business model. These days, criminal history background checks can cost as little as $5 per report. A company can't make a profit selling $5 reports if it has to spend $50 to do the matching required by law. Up until May of this year, background check companies did the required matching with just a mouse click or two. Now, for each report, they might have to send someone to multiple courts to manually review perhaps dozens of case dockets. This manual step costs time and, more importantly, money.

Potential Impact of All of Us or None v. Hamrick

Assuming that the ruling stands, it is difficult to predict consequences of more expensive background checks. It may be that fewer employers will routinely obtain one as part of their hiring process. Those with the resource (and actual business need) would continue to obtain them, but those hiring for a position with a high turnover rate and or have little to no actual business need might not.

Another potential consequence is that employers may become more selective about what records to "buy." Let's say that a background check company's initial search of court indexes (using just a name search online and so still cheap) reveals 20 criminal charges across 12 different courthouses. Most of them are for minor and irrelevant offenses, but one of them is for a serious and relevant offense. Instead of sending runners to all 12 courthouses to retrieve all 20 case dockets in person (and paying for all that manual labor), the prospective employer may choose to only pay for one runner to retrieve one case docket on the serious and relevant charge. In other words, employers could choose to pay only for information that they actually deem relevant in the hiring process.

It remains to be seen what actual impact All of Us or None v. Hamrick will have on the background check industry and those who buy its product, if the ruling stands. For some time now, we as a society have been trending toward more and more background checks in all aspects of life, not caring what adverse impact such a broad access to people's criminal history may have on their lives and the society at large--and forgetting that we are collectively denying a second chance to those who need it the most. Hopefully, the case gives us an opportunity to consider the true cost of background checks.

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