Hiring essentials: Conducting background checks

By by Elizabeth Milito

When it comes to background checks, employers should be aware of the reasons for performing a background check, what basic information to request, and what legal boundaries exist to protect an employee's privacy.

Why Conduct A Background Check?

Federal and state law: Employers are legally required to conduct background checks for certain jobs. Depending on your company's industry, you may need to conduct background checks and may be prevented by statute from hiring employees convicted of particular offenses.

For instance, almost every state requires a background check for anyone who works with children or in a healthcare facility. The National Federation of Independent Business member Beth Clemons of Clemons Bus Lines, a small school bus business in Minnesota, says, "Running a background check is about protecting our clients, which in our case, are kids. We make sure that who we hire is who they say they are."

Prevent Negligent Hiring Lawsuits: Conducting background checks can prevent negligent hiring lawsuits. Most states recognize the tort of negligent hiring, where employers are held liable for hiring an employee whose actions harm someone else.

False or Inflated Information: Conducting background checks allows employers to confirm the accuracy of information in a prospective employee's job application. Replacing an unsatisfactory employee or providing additional training is more expensive than the cost of a background check. A recent study showed that almost half of all job applicants submitted inaccurate information to their potential employer.

Do it Yourself or Outsource the Checks?

An employer may personally conduct a background check, but often the more convenient approach, is to hire an outside agency such as a background check vendor, private investigator, or credit agency to conduct a background check. Always check that the outside company complies with the Fair Credit Reporting Act (FCRA), the federal law that regulates the acquisition and use of background information for employment purposes.

Employers have a range of information that is accessible, but workers have certain privacy rights that they can enforce by suing you if you pry too deeply. Failure to comply with the FCRA can subject an employer to damages, including punitive damage costs and attorneys' fees. If an outside agency is used, you must do the following to comply with FCRA:


  • Give notice to the applicant and obtain written permission for the background check in a separate document
  • Provide specific notice if the report will include interviews with others
  • Give advance notice of any adverse employment decision and present the applicant with a copy of the background check upon taking an adverse action
  • Give notice of rights and procedures to dispute inaccurate or incomplete information

What Records Should You Check?

Always be sure to check your state's laws on background checks since the type of information you are eligible to obtain and use varies by state. The following is a partial list of information and some of the limitations to consider in a background check.

School records: Keep in mind, most schools will not release records without the consent of the student, and some schools will only release records directly to the student.

Credit reports: An employee's written consent is required for a credit report. Many employers routinely include a request for such consent in their employment applications.

Driving records: Always check the driving record of any employee whose job requires large amounts of driving (like delivery persons or bus drivers). These records are available, sometimes for a small fee, from the state's motor vehicles department.

Bankruptcies: Federal law prohibits employers from discriminating against applicants because they have filed for bankruptcy. This means you cannot decide not to hire someone solely because he or she has declared bankruptcy in the past.

Criminal records: Some states prohibit employers from asking about arrests or certain convictions that occurred well in the past. Other states allow employers to consider convictions only if the crimes are relevant to the job. Because of this variation from state to state, you should consult with a lawyer before digging into an applicant's criminal past.

Workers' compensation records: An employer may consider information contained in the public record from a workers' compensation appeal in making a job decision only if the applicant's injury might interfere with his or her ability to perform required duties.

Military service records: Members of the armed forces have a right to privacy in their service records, which may be released only under limited circumstances. However, the military may disclose name, rank, salary, duty assignments, awards, and duty status without the member's consent.

This summary is by no means exhaustive of all background check requirements. All employers are advised to check their state's laws with legal counsel for conducting proper background checks, ultimately curbing costs and avoiding liability.

About the author:

Elizabeth Milito is the senior executive counsel for the National Federation of Independent Business Small Business Legal Center. The NFIB Small Business Legal Center is a 501(c)(3) organization created to protect the rights of America's small business owners by providing advisory material on legal issues and by ensuring that the voice of small business is heard in the nation's courts. The National Federation of Independent Business has offices in Washington, D.C., and all 50 state capitals.

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