According to SHRM, 96% of organizations use reference checks as a screening and selection tool, yet admittedly many experts question the value of reference checks as a valid indicator of job performance. Reference checks have been criticized for their declining value to employers as many companies establish policies against divulging anything more than basic information about past employees. Other problems with reference checks involve practices that impact accuracy and consistency, the difficult and time-consuming process of obtaining a reference check, and the inexperience of those conducting the reference checks.
Despite the potential downsides, employers also recognize that failure to conduct a reference check can open the organization up to negligent hiring claims and lawsuits.
3-in-10 References are Fake
A recent CareerBuilder survey brings criticism of the reference check process further into question as it revealed some startling statistics about the references job seekers are providing to prospective employers.
The survey, which included 2,494 hiring managers and human resource professionals and 3,976 workers across a variety of industries and company sizes, found that nearly 3 in 10 employers have caught a fake reference on a job application. 62% said a reference didn’t give positive feedback about the job candidate.
In our view, these findings suggest that reference checks still do deliver value to employers. The value of finding out that the candidate you’re considering has provided a fake reference or that a previous employer has a less than positive impression of the applicant you’re considering can indeed help employers better evaluate their candidates.
Of course, reference checks must be conducted with fairness and accuracy.
FCRA and Reference Checking
When an employment reference check involves asking questions that go beyond factual items of dates, position, salary, etc., the background report is considered an Investigative Consumer Report, governed by the Fair Credit Reporting Act (FCRA). Among other requirements, these investigative reports require written notice to the applicant that you may request or have requested an investigative consumer report, and require a statement that the person has a right to request additional disclosures and a summary of the scope and substance of the report.
Under the FCRA both employers and background screening companies (CRAs) have obligations to ensure the fairness and accuracy of the information used to make employment-related decisions. When the right steps are followed and paired alongside other background information, reference checks can help employers paint a useful picture of their applicants.
At Proforma, we have developed a powerful applicant-driven reference check and verification system that collects insightful feedback about prospective employees from the people who have supervised and worked with them.