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Check Your Knowledge of Background Checks

Background checks are a useful tool for employers to collect and verify important information about a potential new hire. These screenings are subject to various local, state and federal laws which dictate when an employer can and should use certain types of information in employment decisions as well as how to protect that information.  

To avoid claims of discrimination, background checks should not be conducted on a selective basis.  Consistency is key.  Another critical component is confidentiality where only those in your organization with a need to know should have access to background check results. The following are some other facts to consider:

Ban the Box laws

While each ban the box law is different, they all address when or if the criminal history question may be asked to potential hires, what types of convictions can be asked about, how far back an inquiry may extend and what, if any other exceptions apply. Though most state and local ban the box laws impact public employers, the trend continues to expand to private companies. Currently, 11 states (California, Connecticut, Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, Vermont, and Washington) bar private employers from including conviction history questions in job applications.   

Because the rules vary greatly, it can be a real challenge for multi-state employers to track compliance.  Some companies like Target and Wal-Mart have decided to no longer ask about an applicant’s conviction record during the initial phase of the hiring process.  As part of the background check, an employer must limit questions about criminal history to those records that are consistent with business necessity and related to the position in question.  For example, a background check that reveals a revoked driver’s license could be used to determine whether a candidate is a good fit for employment as a chauffeur but should not be used for an office job. 

Federal Laws

In addition to state and local laws, employment background checks are specifically governed by the federal Fair Credit Reporting Act (FCRA).  This is the primary federal law that regulates employment background checks whether performed by the employer or by a third-party company hired by the employer to perform the review.  

Be aware that an arrest does not equal a conviction. The Equal Employment Opportunity Commission (EEOC) has held that arrests alone should not be used to deny a candidate employment.  This does not mean that an employer is required to hire an individual with a criminal conviction or multiple arrests, but these are issues that should be discussed with experienced HR professionals or employment law counsel.  Remember, the employer retains the discretion and obligation to hire the most qualified candidate.

Before the Background Check – Focus on the Job Duties

The sole purpose of performing a background check should be to determine whether a candidate can perform the duties associated with the position.  Best practice is to check financial information only when there is a strong business reason to do so, such as positions with access to large amounts of cash or corporate assets.  Otherwise, financial background information should not be pursued.

Keeping in mind that screening and verification must be based on the job responsibilities for the specific position, if you decide to perform a background check, your company must first provide a separate document to the applicant or employee disclosing that an investigative consumer report may be obtained for employment purposes and that the individual may request a complete disclosure and copy of the background checks.  The company must also assure the applicant/employee that the information will only be used for employment purposes.

Results from Background Check - Making the Decision

If no red flags come up in the background check, that’s a good thing. However, if the compliant background check reveals something that leads the employer to question whether to hire or promote an individual, the company must provide the applicant or current employee with the information used in making its decision.  Before making any adverse employment decision (to not hire or to terminate), the FRCA requires the company to provide the applicant or employee an opportunity to explain any negative information.  At this stage, the company must provide the applicant/employee:

  1. A notice that includes the name of the company that retrieved the report and the information used by the company to make its decision; and

  2. A copy of “A Summary of Your Rights Under the Fair Credit Reporting Act.”

The applicant/employee can retrieve a free copy of the report from the company within 60 days of receipt and the information found in the report, if incorrect, can be disputed.

Failure to comply with the FCRA can result in state and/or federal government enforcement actions, which may include the filing of a lawsuit.  To avoid these issues, make sure your company or the third-party provider has knowledge and experience with various court systems, as well as the appropriate and cost-effective processes in place to verify that the information in the report is accurate and complies with the FCRA and applicable state laws. 

Other Requests

An employer may also require candidates to provide names of previous employers and dates of employment, which you can verify with previous employers without legal restriction.  Although some states have reference immunity laws in place to protect employers when providing references.  Employers should require applicants to sign a release for the employer to provide any information beyond dates of employment and job title.

Employers can request information about professional licenses and other credentials from licensing organizations.  Also, there is no federal law that prohibits employers from asking about an applicant’s discharge from military service, but some states prohibit such inquiries.  Before making decisions based on a military service background check, consider the reason for the discharge, length of time since the discharge, the type of discharge, and the applicant’s subsequent work history. 

Summary of Background Check Best Practices

  • Wait to conduct the background check until after a conditional offer of employment is made.

  • Limit checks to information that specifically relates to current or future job functions, and do not search for unnecessary information.

  • Be sure to maintain the confidentiality of all documentation associated with background checks.Only those in the company with a “need to know” should have access to this information.

  • Follow FCRA regulations if an adverse employment action is considered.