Utilizing Employment Background Checks

Employer checking background

Background screening provides employers with an idea on the types of legal problems that potential applicants may have had in the past, but there are important legal implications associated with gathering and using this type of information to make hiring decisions. Learn about all of the relevant considerations before incorporating background screening into your company's hiring procedures and consult an attorney to ensure that your practices are in compliance with all applicable state and federal laws.

Legal Considerations

Pre-employment backgrounds screenings must be conducted in compliance with Fair Credit Reporting Act (FCRA) requirements, as well as any state-specific laws that may apply to your company. It's also important to know that conducting pre-employment background screenings can provide legal protection against allegations of negligent hiring practices, but it can also put you at risk for making - or being accused of making - discriminatory hiring decisions.

FCRA Compliance

The use of information obtained via a background check or other consumer report to make hiring decisions must be in compliance with the FCRA, which is enforced by the Federal Trade Commission.

  • Inform: You must inform applicants that background screening information may be collected and reviewed for the purpose of making employment decisions. It's a good idea to incorporate this language into your employment application form. Have your attorney review it to be certain it's compliant with all applicable state and federal laws.
  • Consent: You must get written consent from an applicant before running a consumer report in a form that is FCRA compliant. This is another instance where you should have your attorney approve your document prior to use.
  • Rights: Prior to running a background screening report, you must give candidates a written summary of their rights under the FCRA. If you are using a disclosure notice that was updated prior to January of 2013, you'll need to revise your document to meet updated requirements.
  • Pre-Adverse Action Notification: If something shows up on an applicant's background check that will exclude that person from hire, you must notify the individual in writing of your intention, giving the individual a reasonable amount of time to review the information to determine if it is correct or not. You can view a sample letter at OxfordDoc.com, though you should get your attorney to approve your letter.
  • Post-Adverse Action Notification: Once a final decision has been made not to hire someone as a result of information discovered via a background check, you must provide written notification that includes:

    • Contact information for the consumer reporting agency that provided the report
    • A statement indicating that the reporting agency did not make the hiring decision
    • A notice of the person's rights to dispute the accuracy and completeness of the report with the consumer agency and a right to receive a copy of the report from the agency within 60 days

Negligent Hiring Protection

Human Resources IQ defines negligent hiring as "a claim made against an employer based on the premise of an employer's obligation to not hire an applicant the employer knew or should have known was unsuitable and likely to behave inappropriately toward other employees."

As an example, if you do not run pre-employment background screenings, you could unknowingly hire someone who has repeat violent crime convictions. If such an individual hurts someone in the course of doing his or her job and injured individuals or their family members decide to take legal action against your company, you'll likely be faced with defending yourself against a claim of negligent hiring.

The fact that you did not know about the prior convictions will not likely be an effective defense, because the courts could easily say that you should have known. Failing to conduct pre-employment background checks could very well be seen as a negligent practice since it is easy and inexpensive to run these types of screenings.

Discriminatory Hiring Risk

While using information from background screenings to make hiring decisions can help protect employers against allegations of negligent hiring, it is important to ensure that the way that the information is used to make decisions does not result in potentially discriminatory hiring practices. Employers who implement policies of excluding applicants on the basis of all - or most - kinds of convictions, could make employment decisions that result in discrimination, even if the same standards are applied to all applicants.

In April of 2012, the Equal Employment Opportunity Commission (EEOC) issued guidance for employers in a report that states, "National data supports a finding that criminal record exclusions have a disparate impact based on race and national origin." While the EEOC guidance does not prohibit the use of background screenings, it does indicate that employers should use such information only as it relates to the job the person is being considered for and business necessity. The guidance document directs employers to consider "at least the nature of the crime, the time elapsed, and the nature of the job" and to use a policy that "provides an opportunity for an individualized assessment for those people identified by the screen."

What this means is that any company that uses background screenings as a point of exclusion needs to look at each situation on a case-by-case basis to be in compliance with federal law. Be prepared to defend your reasons for failing to hire someone as a result of conviction history as it relates to the specific job or out of necessity for operating your business. You should also check with your state's Department of Labor to see if there are state-specific restrictions on the use of such information.

Choosing a Background Screening Provider

It's important to use a reputable background screening provider that pulls information from consumer reporting agencies specifically for the employment purposes (as opposed to general public records searches, which cannot legally be used for employment purposes) and that can provide you with guidance regarding FCRA compliance.

There are thousands of background screening firms that can meet the needs of employers. A good starting point to look for reputable firms is the membership directory for the National Association of Professional Background Screeners. The directory will allow you to look at a list of all member firms, or to search for providers within your local area.

Be sure that the company you choose:

  • Is FCRA compliant
  • Offers more than general national searches (such as options for state-wide, county-wide and municipality-based searches)
  • Provides personalized customer service
  • Will discuss compliance issues with you
  • Will provide sample compliance documents, or review and provide feedback on documents that you create.

Keep in mind that, as with anything, you get what you pay for. Quality background screenings generally cost $20 - $50 per person, depending on the level of complexity. Searches that cost less may not be sufficient for employment purposes.

Types of Information

As an employer, you'll need to enter into a formal agreement with the company you choose, providing full disclosure of how you plan to use the consumer information you receive. You will need to decide what type of information you want to pull on each applicant, and it'll be up to you to make hiring decisions based on the information that you receive.

A wide variety of information is available via consumer reports, including:

  • Criminal history: Note that only convictions can be considered when making employment decisions, not arrests, and be sure that you are prepared to defend hiring decisions in light of the 2012 EEOC guidance discussed above.
  • Credit history: Note that employers are prohibited from using credit history to make employment decisions unless it is truly relevant to the job for which the person is being considered.
  • Worker's compensation history: While it is possible to pull information on previous worker's compensation claims, getting it is not advisable for employers to do. It is not lawful to get any type of medical information on applicants before an offer of employment is made, and even getting workers comp history even post-offer poses Americans with Disabilities Act compliance problems.
  • Employment verification: This information can help you determine if applicants truthfully reported their work history when applying.
  • Education verification: This can help determine if academic credentials were truthfully reported on the application.
  • Place-of-residence history: This can help you verify if applicants have reported all states and counties of prior residence when applying.

Making Hiring Decisions

Running pre-employment background checks is a standard part of the hiring process in many organizations, but it's not something that you should start doing without giving careful thought to the legal implications. The key lies with making sound decisions based on job requirements and business necessity, taking into consideration the EEOC's guidelines for making individualized decisions. Consult an attorney with expertise specific to employment law prior to making a final decision regarding how to best utilize background checks in your company's hiring practices.

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Utilizing Employment Background Checks