January 2012
Legal Report
A Publication of the Society for Human Resource Management
Background Checks in India
By Vikram Shroff and Neha Sinha
Companies in India are in recruitment overdrive. Domestic ■■ TCS dismissing 20 employees when background checks
companies are competing with foreign giants for the best Indian revealed fudged resumes.
talent. For HR managers in India, this presents an opportunity
■■ Mumbai blast suspects using fake degree certificates to get
as well as a challenge in finding the right candidates for open
jobs.
positions. While job-specific proficiencies are examined
regularly, the process for background checks is still in a ■■ A driver brutally attacking and murdering a female employee;
nascent stage in India. subsequent investigations revealed that the driver had a
hidden criminal history.
Newspapers regularly report stories of employees with falsified
profiles. Recent incidents include: ■■ A senior professional, boasting certificates from IIT Mumbai
and IIM Ahmedabad and 20 years of corporate experience,
■■ Infosys asking about 100 employees to leave due to
being on the verge of receiving a job offer when background
discrepancies in their resumes.
investigations revealed that the certificates from IIT and IIM
■■ Wipro dismissing 25 employees for forged resumes and were fake.
filing police complaints against the employees and 20
In the quest for better and higher-paying employment
recruitment agencies.
opportunities, individuals tend to falsify their profiles to get an
edge over their peers. While genuine candidates make extra
efforts to develop certain skills and qualifications by attending
workshops and courses, others doctor their resumes to
reflect special skills, educational qualifications and
work experience that they may not actually possess,
in the hope that such misrepresentations won’t be
verified.
Background Check Practices
Background verification has always been on
the recruitment checklists of HR departments
in India, but it has tended to be ticked
off after a cursory glance at educational
certificates and relieving letters from previous
employers. Appalled by recent incidents,
Indian companies have started including
background checks as an integral part of
the recruitment and screening process for
prospective employees.
Background check practices in India vary
significantly across different sectors, and even
across different companies within the same sector,
in the absence of any defined principles, processes
or laws. A comprehensive background check requires a
prospective employer to validate a candidate’s educational
qualifications, past employment records, work experience,
continued on page 7 ➤
6 Legal Report January 2012
continued from page 6
criminal records and identity check, such as a passport, prior to hiring or engaging an individual to deliver services. A
driving license or income tax registration number. An effective specific clause in this respect is generally added to the master
validation process also may involve contacting past employers service agreement, and a breach could result in termination of
and former managers and supervisors. the contract as well as a damages claim.
Leading IT companies in India have implemented stringent due India has no law comparable to the U.S. Fair Credit Reporting
diligence processes to detect falsification of records. Some Act. Further, in light of the relatively less-developed laws on
companies have adopted a two-tier system where reference employment discrimination in India, certain employers conduct
checks are handled partly by in-house departments and partly
medical and health checkups on candidates as a condition of
by third-party agencies. Others have developed processes for
employment.
‘
vigorous technical and HR interviews that help spot anomalies
in education and work experience.
Some companies have developed policies requiring verification
of previous employment and educational records, perhaps
via interaction with previous employers, organizations and In recent times India has seen
educational institutions. Additional policies may require a police
clearance for candidates.
Multinational companies—particularly large ones—that have
set up business operations in India have traditionally exported
a mushrooming number of a
variety of background check and
investigative search agencies.
‘
their policies and standards for background checks. For senior
executive positions, the benchmark has been set higher,
as companies check the candidate’s reputation and any
involvement in unethical practices, securities law violations, Employers should be sensitive and mindful of the data being
exchange control breaches and money laundering. used for background checks as well as the means of obtaining
such data, as India protects the privacy of an individual from
However, in recent times India has seen a mushrooming
unlawful incursion. While India does not have a codified
number of a variety of background check and investigative
law to protect the privacy of an individual, Article 21 of the
search agencies that help their clients in India by conducting
Constitution of India guarantees a person’s right to live with
detailed background checks. Companies have started using
these services especially for higher-level positions. liberty and dignity. This article has been read by the Supreme
Court of India to include the right to privacy.
Additionally, the Information Technology Act, 2000, imputes
Legal Considerations liability upon illegal and unauthorized use of data stored on
There is no legal requirement or standard for companies in India computer systems. And, for entities engaged in the collection
to conduct background checks on prospective employees, and maintenance of personal data relating to individuals’ credit
except in certain cases. For example, India’s central bank, histories, the Credit Information Companies (Regulation) Act,
the Reserve Bank of India (RBI), has issued notices to banks 2005, attributes liability upon leakage or alteration of such data.
requiring them to conduct a background check of personnel
recruited as dealers from other banks. The RBI has placed the Challenges
onus on banks to ensure that recovery agencies do not employ
people with criminal backgrounds. And Indian companies that A comprehensive background check and validation process
have an ISO 27001 certification or that follow similar standards faces some practical challenges in India. One of the reasons is
are required to conduct background verification checks on the absence of requisite and updated information on criminal
candidates for employment. matters, case history, creditworthiness and violations of law.
In the absence of specific laws, at times the impetus for Further, in the absence of certain information being available in
conducting background checks is contractual. Foreign a centralized manner, there is the need for physical verification
companies, especially those from the United States, that of information and records in India. This is especially true for
outsource projects to Indian service providers, may require the
providers to undertake comprehensive background checks continued on page 8 ➤
7 Legal Report January 2012
continued from page 7
criminal records because such verification is possible only by database of academic records in an electronic format. One
visiting each police station in the local areas where the person of the principal aims of this project is to eliminate fraudulent
resided. practices, such as forging certificates and mark-sheets,
through online verifications. It is intended that all educational
Records for individuals on a national or state level do not exist.
institutions be registered with the NAD, such that the NAD
Further, some of the traditional educational institutions have
could be used as a single-point verification center for all
not developed a practice of maintaining detailed information
academic records.
of their ex-students. Companies are also not very forthcoming
in sharing compensation details or the actual reasons for The National Association of Software Services Companies
employment termination. (NASSCOM) is possibly the first industry association that
has taken a step toward addressing the problem of the
unavailability of information needed to undertake background
Initiatives checks. NASSCOM set up the National Skills Registry (NSR),
The Indian government has launched a project to provide a a database of IT professionals in India, in 2005. The NSR
Unique Identification (UID) number to all citizens. The UID database is maintained by the National Securities Depository
would be like a national identification number and would include Ltd. (NSDL) and is a centralized database of information on IT
biometric data and other information on every Indian citizen. professionals in India with details of educational qualifications
This project may link all identity databases, such as for driving and employment history.
licenses, passports and voter IDs, and could be used to access Upon registration in the NSR database, individuals are required
personal, educational, professional and criminal records as well to provide detailed records of educational and professional
as credit histories for each Indian citizen. qualifications, employment history, and biometric information,
which is verified and authenticated by independent agencies
The government is also exploring the idea of setting up
a National Academics Depository (NAD) as a national continued on page 9 ➤
8 Legal Report January 2012
The Society for Human Resource
Management (SHRM) is the world’s
continued from page 8 largest association devoted to human
resource management. The Society
selected by NSDL. As of February 2011, more than 800,000 serves the needs of HR professionals
and advances the interests of the HR
professionals have registered their profiles, and 98 leading profession. Founded in 1948, SHRM has
companies representing more than 60 percent of industry more than 250,000 members in over 140
countries, and more than 575 affiliated
employee strength have subscribed to the database.
chapters. Visit www.shrm.org.
Following suit is the Retail Association of India, which has The SHRM Legal Report is a newsletter
partnered with a leading HR consultancy and background intended as general information, and
is not a substitute for legal or other
verification firm to create a database of people employed in the
professional advice. The opinions
retail industry verifying their backgrounds. Similarly, leading expressed by the authors do not
insurance companies have come together to bring into being necessarily reflect those of the Society
for Human Resource Management.
a database of more than 300,000 people employed in the life
and general insurance sector. Editors: Allen Smith
Joanne Deschenaux
Copy Editor: Erin Binney
Vigorous Screening Designer: Mari Adams
Weeding out candidates with fudged resumes and Legal Report © 2012
preventing fraud requires a vigilant eye and a reliable method Society for Human Resource
for background screening. Having realized the need for Management
background checks, a number of Indian companies have 1800 Duke Street
Alexandria, VA 22314 USA
started developing vigorous screening policies for new hires
that vary based on seniority and position. +1-800-283-7476 (U.S. only)
+1-703-548-3440 (Int’l)
+1-703-548-6999 TTY/TDD
Indian companies have started realizing that an effective due
+1-703-535-6490 FAX
diligence process for candidates can help reduce workplace-
related problems such as theft, embezzlement, violence, injury Internet: www.shrm.org/law
E-mail: Allen.Smith@shrm.org
and harassment. Such practices can also help mitigate the
risks of potential lawsuits as a result of negligent hiring. Please contact the Copyright Clearance
Center for permission to reprint complete
articles or article excerpts by calling
While the task of conducting a comprehensive background
+1-800-772-3350. If you would like to
check continues to be a challenge, initiatives by the order glossy reprints or seek to
government and industry associations should make the reproduce an article on your website,
please contact the YGS Group by calling
process simpler and less time-consuming.
+1-800-501-9571.
11-0779
Vikram Shroff and Neha Sinha are attorneys with Nishith Desai
Associates in Mumbai, India.
9 Legal Report january 2012
