October 17, 2023

3 Things HR Professionals Should Know About AI in Background Screening

Unleashing the Power of AI in Background Screening: Navigating Guidelines and Compliance

As we surge ahead into an era of technological innovation, the landscape of employment background screening is evolving at a rapid pace. Employers must be cautious and informed to navigate the intersections of artificial intelligence (AI), the Federal Trade Commission (FTC) guidelines, and the Fair Credit Reporting Act (FCRA).

The Impact of AI in Background Screening & Selection Tools

Employers cannot rely solely on vendor assurances regarding compliance with Title VII of the Civil Rights Act of 1964. Recent guidance from the U.S. Equal Employment Opportunity Commission (EEOC) clarifies that if an AI tool results in an adverse discriminatory impact, the employer may be held liable. This wake-up call emphasizes the importance of realizing that longstanding nondiscrimination laws also apply to AI-driven employment selection tools.

1. AI in Background Screening

AI, with its data-driven algorithms, has the potential to revolutionize background screening by speeding up processes and increasing accuracy. According to a recent article by SHRM, “AI can quickly sift through millions of records in seconds, identify patterns or concerns that a manual reviewer might miss, and integrate disparate data sources to form a more complete picture of job seekers.” The article also highlights the benefits of AI such as reducing time spent on reviews and improving efficiency.

However, concerns related to AI must be acknowledged. As the same article mentions, “There’s an ongoing concern about AI perpetuating human biases, especially if it’s trained on historically biased data.” It is crucial to ensure that AI models used in background screening do not inadvertently favor or disfavor certain demographics, potentially leading to discrimination.

Transparency is another aspect that should be addressed. The “black box” nature of some AI models can make it challenging to understand and justify certain recommendations. This makes it harder to address disputes and ensure accountability.

2. FTC Guidelines on AI in Background Screening

The Federal Trade Commission recognizes the potential pitfalls of AI and has provided guidelines for businesses. In accordance with these guidelines, here are some key takeaways:

Truthfulness: Any claims about what an AI tool can do, especially regarding employment screening, must be substantiated. It is essential to provide accurate information about the capabilities and limitations of AI systems.
Fairness: Companies must ensure that their AI models do not perpetuate bias or result in discriminatory outcomes. This involves thorough testing and validation to identify and mitigate potential biases.
Transparency: Transparency is crucial when it comes to AI in background screening. Users should be informed about how the AI operates, the type of data it uses, and any potential risks involved. For example, if an AI tool uses social media behavior as part of its background screening process, this must be disclosed.
Accountability: There must be a mechanism for dispute resolution, and companies should regularly validate their AI systems to ensure they remain accurate and fair. Regular audits and reviews are necessary to maintain accountability.

3. Fair Credit Reporting Act (FCRA) and AI in Background Screening

The Fair Credit Reporting Act (FCRA) plays a crucial role in the background screening process, particularly when it involves credit checks or any background screening conducted by a third-party agency. To maintain compliance and make informed decisions, employers need to keep certain factors in mind.

First, before conducting a background screening using a third-party agency, employers must disclose and obtain written consent from the applicant or employee. This step ensures transparency and sets a foundation for a fair screening process.
Second, if the employer plans to take adverse action based on the background screening results, such as not hiring an applicant, they must follow specific procedures. This includes providing the individual with a notice, a copy of the report, and information about their rights under the FCRA.
Third, individuals have the right to dispute any inaccurate information in their report. In such cases, the reporting agency has an obligation to conduct a timely investigation to ensure accuracy.

Conclusion

In summary, the advent of AI presents a promising opportunity for employers to add efficiency and innovation in background screening while avoiding potential legal, ethical, and compliance issues. However, it is critical that companies tread carefully when utilizing this new technology and follow a few key steps to ensure successful implementation. Ensure all relevant FTC and FCRA regulations are followed, thoroughly evaluate AI vendors for bias, transparency, and guidelines adherence, and provide training on using AI for those conducting the background screenings.

By implementing these strategies, employers can make compliant and fair hiring decisions with minimal disruption to the overall process. If you need assistance in navigating this complex landscape, Alliance Risk Group, Inc. is here to help! Contact us today!