Employment Background Screening: Necessity in Today’s Environment

1. Employment Background Screening:Necessity in Today’s Environment Presented by: Jeff Wizceb – Vice President Business Development HR Plus, A Division of AlliedBarton Security Services

2. Overview • Industry Background and History • Need for Background Screening • Current Environment and Challenges

3. Industry Background & History

4. Industry Growth • High Growth since mid-1980’s • Stimulated by: • Increase in employment litigation lawsuits • Growing awareness of need • Find the “best candidate” • Reduce employee turn-over • Concerns of workplace violence • Increase in transient workforce (temps, contractors) • Increase in employee fraud, identity and information theft

5. Industry Growth • Concerns of global terrorism • September 11, 2001 attacks on World Trade Center and Pentagon • October 12, 2002 and October 1, 2005 bombings in Bali, Indonesia • March 11, 2004 train bombings in Madrid, Spain • July 7, 2005 public transportation system bombings in London, UK • Better Technology leading to greater affordability

6. Industry Progression Public Record Retriever Network organized 1995 FCRA becomes main law governing the industry 1997 Workplace violence dominates the headlines 1999 9/11 increases public awareness; CA-1786 enacted 2001 NAPBS founded with 200+ members 2003 • More and more employers concerned with the high cost of not screening applicants • Dedicated Pre-employment screening agencies replace traditional Private Investigators as the main supplier • NAPBS emerges based on desire to address common needs within the industry 1996 Half of all HR professionals use screening to some extent 1998 The Internet begins to impact the industry 2000 Resume fraud becomes a major news story 1994 Driver's Privacy Protection Act becomes law 2002 NAPBS proposed by leaders at industry conference

7. Fair Credit Reporting Act • Public and Private Companies using 3rd parties • Protects Consumers and Companies • Regulates use of disclosure form • Can’t be “hidden” as part of application • Adverse Action • Grants opportunity to contest information in reports • 99% of time candidates go away

8. Competitive Front • Early Nineties: approximately 30 screening firms performed screening services • 2007: over 1,800 screening firms in existence across the U.S. (includes P.I. firms) • Industry consolidation • Companies emerged to capitalize on growing security concerns • Price Competiveness

9. Today’s Industry Landscape • Overall growth estimates • Past decade’s growth: 25-35% • Today: 5-7% • Currently, $2.5 billion in total annual spending by employers, non-profits and volunteer groups • 96% of employers or larger firms across the U.S. conduct some type of employment screening* • 55-60% are small to mid-size employers * Source: 2006 Society of Human Resource Management (SHRM) study

10. Need for Background Screening

11. Does Screening Make Sense? • Employee Fraud and Abuse cost companies $600 Billion • 2 million people physically attacked in workplace related incidents, 6 million threatened • $800k for average negligent hiring lawsuit • Internal theft costs companies over $19.5 Billion • 35 % of Resumes and 70% of Job Applications contain falsified or embellished information. • 30% • Business Fail due to poor hiring practices • Of annual salary – cost of hire • Decrease in employee fraud by those companies who conduct background screening

12. Candidates with Derogatory Information • Criminal Records– 8.6 % • Education Discrepancy – 17.55% • Employment Discrepancy – 28.53% • Motor Vehicle Record Derogatory – 41.9% • Credit Report – 49.0 % • Drug Testing – 2.6 %

13. Question • What Question is everyone going to ask after a bad hire is made? How did you hire that person?

14. Benefits of Screening to the Company: • Lower Liability • Safe Work Environment • Negligent Hiring • Brand Protection • Quality Hires • Reduced Losses (Fraud and / or Abuse) • Compliance (Regulated Industries)

15. Current Environment and Challenges

16. Today’s Economy and the Effect • Increase in Falsification • Stretching the Truth • Desperation • Increase in “Cloaking” Negative information Top 5 Lies Job Title Date of Employment Graduation Dates / Attendance Grades / GPA Degree

17. Current Job Market • Top Question: • “How can I reduce cost?” • Hiring is down significantly • Organically, spending is down • Employee pools are much larger • Screening is more imperative • Less “desired” candidates

18. Liability Coverage • Vendor Programs • Who is coming on to your facilities? • Are you screening appropriately? • Industry specific • Job categories • Government Regulations • Practiced Policies (National and International)

19. Current Job Market • Actions to Consider • Revising Policies • Streamlining screening • Positive Actions to Take • Find a vendor who is a “better fit.” • Is your vendor an NAPBS Member? • Does your vendor have a compliance expert on staff? • Education of newly created service offerings • Streamline processes

20. Challenges • Push to tie-in other services (cont’d) • Identity Theft Products • The number of US adult victims of identity fraud decreased from 10.1 million in 2003 and 9.3 million in 2005 to 8.4 million in 2007. • The mean fraud amount per fraud victim decreased from $6,278 in 2006 to $5,720 in 2007. • The mean resolution time was at a high of 40 hours per victim in 2006 and was reduced in 2007 to 25 hours per victim. The median resolution time has remained the same for each Survey year at 5 hours per victim. * Source: http://www.privacyrights.org/ar/idtheftsurveys.htm

21. Challenges • Identity Theft Products • What do they do? • Varies Depending on product • May include: Fraud Monitoring Stolen Wallet Assistance Fraud Alerts No Call List / Mailing list Credit Monitoring Service Guarantee Credit Reports Protection of “other” information • Do they work?

22. International Challenges and Pitfalls • Imperfect Practice • Legal and cultural differences • Company policies do not address actions to take • Privacy laws, security standards and discrimination • Court system variations and terminology • Information access and credible source concerns • Language and time zone barriers • Name variations and complete identifiers • High costs and slow turnaround times

23. Opportunities • Biometrics and Fingerprinting • I-9 Compliance • Internet Name Searches • Periodic Screening • Data-mining • FBI Database Searches • NAPBS Accreditation

24. Questions & Answers