On 13th July 2022, the CEO and Managing Director of Dredging Corporation of India (DCIL), Mr. GYV Victor was suspended pending disciplinary proceedings against him on allegations of forgery. On investigation, it was found that Mr. Victor had suppressed facts (including material misrepresentation of facts) and made false claims in support of his experience in his application to the role advertised by DCIL. This incident unequivocally illustrates the importance and need for Background Verification (‘BGV’) of prospective employees, and what can happen when such verification and due diligence is not done.
In order to avoid precisely such a situation, many companies have a stringent BGV process for hiring candidates. Currently, there is no law in India which requires employers to conduct background checks, nor is there a dedicated law which regulates the BGV process. However, ISO 27001-certified companies are required to conduct background checks as per the compliance requirements of ISO’s Information Security Management Standards. Though the degree of background checks would depend on various parameters like prior experience, nature of engagement, etc. and is linked to the nature of work, the company must ensure that the depth of background checks is proportional and relevant to the business requirement.
General Obligations of an Employer:
While conducting the BGV process, either directly or through a third-party agency, the company must ensure that it complies with its contractual obligations to the employee as regards data privacy, obtaining the employee’s consent, etc. For this purpose, it must ensure that its onboarding documentation and processes, as well as other policies and processes such as the disciplinary policy, have the BGV process built in from the outset and are in line with it. These will also have to consider the requirements of law, including the Information Technology Act, 2000 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (SPDI Rules) which regulate the collection of personal and sensitive data.
What if things go wrong?
All is well if the candidate clears the BGV. However, in the event the candidate fails to clear the BGV process, the company may be faced with the following challenges:
Receiving the BGV report after the candidate has been employed and confirmed in service: –
Often, the BGV process takes longer than it is supposed to take, by which time the company may have already confirmed the employee in service. In situations where the BGV report is positive (no red flags), there is no concern. However, dealing with employees (particularly those that have niche skills or in critical roles) who have already become a part of the system, may pose a challenge in cases where the report discloses issues such as prior criminal cases against the candidate that they had not disclosed during the onboarding process. The company needs to account for such scenarios in its BGV policy and to make a candidate aware of those conditions from the outset.
Accounting for additional time spent on failed BGV: –
One of the most common reasons for failed BGV is mismatch of information provided during the BGV. In such cases, the candidate is generally given an opportunity to explain the discrepancy in his/her data submitted during the BGV process.
Where the candidate comes back with additional or clarificatory data, the company may engage its internal resources (in addition to the BGV personnel) to investigate the genuineness of the data provided by the candidate. Further, there may also arise a situation where it may be necessary for the company to re-initiate the BGV process.
This would mean that the company must account for additional manhours of its resources in the above scenario besides payment of additional cost towards re-initiation of BGV.
How should an employer handle failed BGV?
It is commonly observed that many companies safeguard their interest by having a conditional clause in the employment agreement to the effect that the appointment of the candidate may be subject to termination in case of a failed BGV report, which is a good business practice. While termination may seem like the best option available to the employer, some companies even go to the extent of blacklisting the candidate. However, such termination is not simple, and it comes with a cost, as failed BGV requires investigation by the company before initiating the termination process or imposing any form of punishment.
The best approach for organisations would be to have successful completion of BGV as a condition precedent to confirming the employee itself.
Further, the company may consider looking into the following aspects while handling a failed BGV.
The reason behind a failed BGV must be examined and accordingly, the next course of action may be decided.
Steps to be taken in case the candidate is already integrated in the system.
Steps to be taken in case the candidate is not part of the system.
Lay down the criteria or the determining factors for continuing or terminating the employment of the candidate.
Basis the above, whether the company wishes to retain the candidate or not has to be ascertained.
Last but not the least, if BGV has showcased malpractice or misconduct of any kind, the punishment has to be defined. Companies should take into account their organizational DNA, culture, brand and image, risk appetite, compliance mindset, etc. amongst several things while defining the level and extent of punishment.
While companies exercise ample caution during the hiring process, the BGV clearance is still susceptible to slips and may require multiple human interventions and verification. The recruiters/employers are usually subject to tight timelines for hiring and due to cost constraints, they may go easy on checks and verification.
Though we see no blanket solution to address the cases of failed BGV, the company may consider strengthening the BGV process by having a dedicated BGV policy in line with the other employment policies of the company.
In conclusion, employers must be mindful of the following aspects while dealing with BGV, which will help keep the process smooth:
Ensure that the recruitment process is transparent and clearly understood by the candidates.
Obtaining consent from the candidates is a MUST for the BGV process, especially in the case of personal and sensitive information.
Maintain secrecy and confidentiality of information shared during the BGV process.
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