Background Checks: How To Conduct Them Fairly and Legally

A single bad hire can cost a company more than just time and money. It can threaten safety, morale, and reputation. More than ever, employers use pre-employment background checks to go beyond the surface and verify who they’re bringing into their organization.

While background checks help businesses make informed hiring decisions, they also raise important questions about privacy, fairness, and second chances. Understanding the different types of background checks and the legal requirements that surround them is essential for both employers and job seekers alike. For legal help, reach out to an employment lawyer.

Types of Background Checks

Background screening is a process by which an employer verifies a candidate’s history. Typically, it is done through third-party consumer reporting agencies or internal research. The purpose is to assess potential risks and confirm qualifications.

A background check can consist of several types of background checks that cover the candidate’s personal history.

Criminal Background Check

A criminal history check will search local, state, and federal databases for records of arrests, criminal convictions, and pending charges. Criminal court records may also be included in this check.

Credit Check

Credit reporting includes an individual’s financial history. This is often required for positions that involve handling money or assuming fiduciary duties. Credit reports include account histories such as on-time payments, accounts in collections, number of accounts open, available credit, and bankruptcies.

Employment History Verification

Many employers require verification of education and employment history information provided by the candidate. Generally, confirmation of previous employers, position titles, and dates of employment are requested.

For education, this includes claimed degrees and certifications. Some professions require a company to check for a professional license as a part of employment verification. For example, doctors and lawyers must hold a professional license in good standing to practice.

Sometimes, a position requires employees to possess specific skills. For example, a position that requires driving may necessitate a background check that includes driving records. Motor vehicle records will include ticket and accident histories to confirm the candidate is a safe driver.

Drug Testing

Drug testing is another common type of pre-employment screening that a company may require. For some, it is an extra element of standardized screening. For others, it is required so the company stays in compliance with state or federal laws. This is typically done in industries known to be inherently hazardous, or that directly impact public health.

Social Media and Public Records Check

When a position requires the employee to represent the business, a search of public records and social media may be included. This is readily accessible information that could be easily found by the public. A company may want to confirm that the individual chosen will appropriately represent the company’s morals, values, and ethics.

Impact of Background Checks on the Workplace

Requiring background checks has a direct impact on hiring practices. A background check with issues can negatively impact hiring decisions and can lead a company to rescind a conditional offer or delay onboarding.

However, thorough screening can protect industries by preventing violence, fraud, and theft. If a company uses background checks improperly, it can have a disproportionate impact on minority groups.

Federal Laws and Background Checks

Employers who run background checks must comply with several federal laws.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) governs employers’ use of third-party consumer reports, including background checks. The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) enforce the FCRA.

There are two types of reports that consumer reporting agencies (CRA) typically provide to employers:

• Standard consumer report. Includes information like credit history, criminal background, and driving record.
• Investigative consumer report. Includes more detailed information such as personal interviews regarding a person’s character, general reputation, or lifestyle.

The FCRA requires several things from employers when using third-party reports:

• Clear written disclosure to the applicant
• Written consent from the applicant
• Notice before taking an adverse action
• Copy of the background report and “A Summary of Your Rights Under the FCRA”
• Final adverse action notice with contact information of the consumer reporting agency used for the report

Employers who don’t comply with the FCRA’s requirements can face legal action and severe financial penalties.

Federal Anti-Discrimination Laws

A number of federal laws prohibit employment discrimination based on protected characteristics, including race, color, national origin, sex (including gender identity and sexual orientation), and religion.

Using criminal history or other background data in a way that disproportionately excludes protected groups can constitute a disparate impact violation under Title VII — even if the policy appears neutral on its face.

Policies that automatically disqualify any applicant with a criminal record are likely to violate Title VII. Blanket bans on criminal records fail to consider individualized circumstances and often have a disparate impact on racial minorities. Furthermore, applying background checks inconsistently across candidates based on race, gender, or other protected characteristics is unlawful. Employers may not retaliate against applicants or employees who assert their rights under anti-discrimination laws.

Employers can reduce the risk of a discrimination claim by maintaining consistency in their hiring practices. Companies should apply the same criteria and decision-making processes to all candidates. It should also keep documentation of decision rationales, especially in cases involving criminal or financial histories. Clearly defined written policies help ensure consistent implementation and provide a defense in the event of a discrimination claim.

State Background Check Laws

The majority of states have laws that mirror or provide greater protections than federal laws. Most common is a Ban-the-Box law, which has been enacted in California, Illinois, Massachusetts, New York, and more than 35 other states.

Some states limit using a credit report for making hiring decisions. This can include being prohibited from asking about previous salary. States like New York and New Jersey restrict employment decisions based on marijuana use unless required by federal law or job safety.

Local Background Check Laws

Some major cities have local laws that impact those operating within city limits. For example, New York City’s Fair Chance Act requires employers to delay criminal background checks until after a conditional offer. The goal is to prevent hiring decisions from being made solely on the basis of criminal records.

Best Practices for Conducting Background Checks

Businesses that have formal background check policies in place are more likely to comply with the law and avoid violating an applicant’s rights. Policies ensure consistency across hiring processes and can support the defense in employment litigation.

Background check policies should address when, why, and how company representatives can conduct background checks. The policy should address and comply with federal and state laws, including the FCRA, while addressing the specific needs of the company’s industry.

Background checks should be tightly tailored to focus on the information directly related to the position’s responsibilities. Companies should avoid gathering non-job-related information. For example, criminal background checks shouldn’t include arrests without convictions. Driving history is unnecessary if the job doesn’t require the employee to drive. There should also be a time limit for the scope of the background check. Some states limit the time scope to a specific number of years.

Employees who are involved in the hiring process need to be trained in the policy. Training should include explanations of the FCRA, Title VII of the Civil Rights Act, and how to comply with U.S. Equal Employment Opportunity Commission (EEOC) regulations. Employees should be taught proper procedures for handling sensitive information. Provide refresher courses, especially when laws change, or new jurisdictions are added to hiring areas.

Respecting Applicant Rights and Privacy

Employers must balance protecting their own interests with the privacy rights of the job applicants. When performing employment background checks, employers should provide clear and conspicuous written disclosure. This disclosure must be a standalone document that states a background check will be performed for employment purposes. Applicants must give written authorization before the background check can be performed. If the employer intends to perform periodic background checks, additional consent may be required.

If the background check may lead to a negative employment decision, employers must provide a copy of the background report and a Summary of Rights Under the FCRA. A five-day period must be given to the applicant to dispute or explain the information before taking the adverse action.

If a decision is made not to hire, employers must send a formal notice. This notice must include the name and contact information of the consumer reporting agency (CRA) and that the CRA didn’t make the hiring decision. The applicant must also be given notice of a right to dispute within 60 days.

Confidential Handling of Personal Data

Employers must keep the information collected during the hiring process secure and confidential. Sensitive data should be kept in a secure electronic system to limit access. When disposing of background checks should be done in accordance with the FTC’s Disposal Rule.

Many states impose stricter privacy standards than federal laws. The California Consumer Privacy Act (CCPA) grants applicants rights to know what data is collected, request deletion, and opt out of data sales. The Illinois Biometric Information Privacy Act (BIPA) restricts the collection of biometric identifiers.

Find Legal Help

Pre-employment background checks are a crucial part of the hiring process, offering employers a clearer picture of a candidate’s history and suitability for a role. However, large and small businesses must also understand the legal obligations they carry. Partnering with an employment lawyer ensures that your background check procedures are compliant, consistent, and tailored to your business’s specific needs.

Use the Super Lawyers directory to find a qualified employment lawyer to assist with your claim.