POSTED ON SEPTEMBER 5, 2012:
Check Them Out
Local firm AmericanChecked rides wave of increased demand for background checks to find business success
At first, the call surprised Julie Hakman.
"Hey, I just want to thank you for doing my background report," the man said. "There was a record from a long time ago that was supposed to have been cleared off, and you reported it."
So if the record was wrong, why was he thanking her, Hakman initially wondered. President and chief executive officer for Tulsa-based AmericanChecked, she works for companies -- mostly mid- to large-sized businesses -- to do background checks on potential hires.
Companies increasingly want to know more about their workers or even volunteers before bringing them on board. They turn to companies like AmericanChecked for answers.
Sometimes -- like in the case of the caller -- the reports aren't quite accurate. But rules governing credit reporting agencies require applicants to be notified if something on their record prevents them from getting the job.
The caller to Hakman had disputed the report.
"We helped him with the dispute. We helped advise him where the record was and how to clean it up and he did so. And we corrected the record and gave it to the employer and he got the job," said Hakman, a friendly woman who admits to being a little nervous speaking with a reporter despite frequently giving presentations to large groups about pre-employment screening.
"He was calling to thank us for letting the process work well for him. And that's how it should work," Hakman said.
Hakman built her company from scratch starting in 2003, developing it into a national business.
Companies, including those in the gaming industry, which were AmericanChecked's first clients, may want to know an applicant's criminal history or driving record, Hakman said. Much more rarely, they will seek information about a person's credit history.
There's little doubt about increased demand for such services -- 9/11 certainly contributed to it -- but there are many players vying for a piece of the background check business, Hakman said.
"Analysts have put the number at somewhere between 2000 and 3000 background screening companies out there," Hakman said from her office on South Lewis Avenue. "Ninety percent are smaller businesses, and by smaller business, I would say they're in the $1 million to $8 million dollar range. So we're probably in the mid-part of the smaller companies." Only "a handful" of companies in the industry top $20 million in revenue, she said.
One of the larger of these companies, also based in Tulsa, was hit with a $2.6 million penalty from federal regulators in August. HireRight Solutions, Inc.
Tulsa-based HireRight Solutions is now described as part of a family of companies on the main HireRight website. The California-based HireRight reportedly took in $294 million in revenue in 2011, according to an Inc. magazine report in August that tabbed the company at 1042 in list of the 5000 fastest-growing privately-held companies.
But authorities with the Federal Trade Commission highlighted missteps they claim were made by a company that provides background reports "to thousands of employers," according to a complaint filed Aug. 8 in federal district court in Washington, D.C., which outlined the authorities' case that the company practiced sloppy record gathering and sometimes failed to investigate when applicants disputed the records reported to potential employers.
In some cases, federal authorities claimed that HireRight reported "obviously erroneous" information, mixing records of applicants with consumers who had different names or dates of birth. By agreeing to pay the penalty and settle the complaint, HireRight admitted no wrongdoing.
The case was widely reported as the first time the FTC had pursued a background screening company for violating terms of the Fair Credit Reporting Act.
But Hakman said the industry as a whole works hard to avoid errors.
"There's an increasing amount of concern about how we do things and where our information comes from and how we handle information and how we vet the information," Hakman said. "It's difficult. It's not daunting but it's complex and it's difficult and it's very important that someone understand every aspect of the legal climate and the consumer climate to handle information properly. And if done properly, we can serve as a very positive influence, even on the consumer side."
Hakman said the industry, through the professional organization National Association of Professional Background Screeners, has begun its own accreditation process.
"The more and more people that become accredited, I think the more folks that are maybe doubting or concerned will see how sincere these folks really are," Hakman said. AmericanChecked has been accredited by the group.
It remains to be seen if more regulation will follow. In April, before the penalty paid by HireRight, the National Consumer Law Center issued a scathing report on background check companies, recommending that state governments consider auditing the industry.
But the center also noted the demand for the service, reporting the results of a 2010 survey by the Society for Human Resource Management. About 93 percent of employers do background checks on at least some applicants, while 73 percent do such checks on all applicants.
The number of people potentially affected by such checks is large, especially in Oklahoma. The state routinely ranks among the top four states in incarceration rates, though the actual rate has begun to tick down slightly. In 2006, state researchers estimated the felony rate at about 1 in 12.
Hakman said the U.S. Equal Employment Opportunity Commission has recently stepped in with new guidance for employers.
In April, the EEOC stressed to employers that an arrest alone often is not sufficient to determine employment decisions, depending on how the alleged conduct relates to the specific job duties. The commission also noted that a record of an arrest may be inaccurate, and that even records found in FBI and state databases sometimes "are not associated with final dispositions."
Even if there is a conviction, Hakman noted that the goal of the EEOC is to get employers to consider the "nature and gravity" of a criminal offense, as well as how it would relate to the nature of the job. Overall, the goal is to "make the hiring practice most fair," she said.
In a competitive field, Hakman said AmericanChecked, founded in part with her own money, stands out by making sure that people always come first.
Starting out, "what I really felt strongly about is, at the end of the day it truly is about people," Hakman said. That commitment remains today, she said. And the business -- which right now has 13 staff members, not including eight contract workers and six information technology staff -- continues to grow.
"We've outgrown this facility, so we're going to expand next year," she said.
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