Employment Background Checks: A Guide for Employers

Know the Law Before Doing a Pre-Employment Screening

Employees Meeting for the First Time
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Most businesses do employment background checks to pre-screen applicants and to vet employees. But background checking can be a minefield as you try to comply with federal, state, and local laws. If your company is considering using employment background checks, it’s important to know what you can and can’t do before adding it to your list of new-hire paperwork.

You can do background checks on applicants and employees, with some exceptions and limitations. You must comply with federal, state, and local regulations, and you can’t use the information from a background check to discriminate against people in any ways that violate those laws.

One important reason to do background checks is to protect your business from liability for employee actions. Negligent hiring makes an employer liable for the acts of an employee, and courts look at whether the employer exercised reasonable care in hiring and managing that employee.

When Are Background Checks Required?

State laws require background checks for anyone working with children, the elderly, or disabled people. Contact your state or local human services office for more information.  

The U.S. Department of Transportation (DOT) requires employers in certain transportation industries to conduct drug and alcohol testing of some applicants and employees.

Employers can use the DOT questionnaire to see their business is covered.

Laws Regulating Background Checks

Two major federal laws affect your collection and use of information about applicants and employees: 

  1. Fair Credit Reporting Act (FCRA): This promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. Although it regulates reporting agencies, its regulations affect your business. You must make sure that the reporting agency is complying with the law. 
  2. Equal Employment Opportunity Commission (EEOC): This enforces laws that protect applicants and employees from discrimination based on race, color, national origin, sex, religion, disability, genetic information, and age (40 or older.) It covers all private employers with 15 or more employees (20 employees for age discrimination purposes).

State and local consumer protection and non-discrimination laws may be different from federal laws. You must comply with the law that is most favorable to the applicant or employee.

Anyone offering background screening products or apps is a “consumer reporting agency” and they must comply with FCRA regulations. This means social media, too. It’s your responsibility to make sure they are within the law. 

How to Use Employment Background Checks

When you request a background check on an applicant or employee, you must have a specific use for that check. You can only use the test for that one purpose.

For example, you can’t use the background check to qualify an applicant then use it later to decide on a promotion for that person or give it to another department in your company. And once you use the report, you must dispose of it securely, along with other related information.

What You Can and Cannot Ask in a Background Check

Time Limits on Information

According to federal law, some information may not be used if it is older than a specific number of years (usually seven), but criminal convictions and information on employees who earn more than $75,000 per year are available indefinitely.

Information You May Request

Here are some of the records you can request in an employment background check:

  • Court records
  • Criminal history: Public for arrests and convictions
  • Credit reports and financial information
  • Driving records and vehicle registration: Can be reviewed for employees who will be driving for their jobs
  • Education records: Can be accessed, but with limitations (not grade transcripts) 
  • Lie detector tests: Generally not allowed for employees or applicants unless there is reasonable suspicion of the person’s involvement in workplace fraud
  • Military records: Private and only available through the Freedom of Information Act

Medical information is confidential and you can’t ask for it unless it’s relevant to the process or affects employment. The person must provide specific written consent with a description of how the information will be used.

Match the information you ask for with the job description of the employee. An employee who has responsibility for company funds should be checked for both criminal history and financial information, but you may not need this information for an employee who isn’t doing this type of work.

The Background Check Process 

Before You Do a Background Check

You must get the applicant’s written permission before you do a background check. The permission must be on a separate document (not with the application form). If you are hiring a remote worker, you can get the consent orally, in writing, or electronically.

If You Take Action as a Result of the Report 

If the report results in your taking negative action against an applicant or employee, you must give the person:  

  • A copy of the report 
  • The contact information for the consumer reporting company
  • A statement that the reporting company didn’t make the decision
  • A description in writing of the rights of the applicant, including the right to dispute the accuracy or completeness of the information

As you start doing employment background checks, you’ll find there are many details, limits, and deadlines for employers to follow. Be sure to check federal and state laws and get help from an employment attorney if you have questions or concerns.

Article Sources

  1. Electronic Code of Federal Regulations. "Title 49 Subtitle A. Part 40 – Procedures for Transportation Workplace Drug and Alcohol Testing Programs." §40.1 Who does this regulation cover? Accessed April 16, 2020. 

  2. U.S. Equal Employment Opportunity Commission. "Get The Facts Series: Small Business Information." Accessed April 16, 2020. 

  3. U.S. Equal Employment Opportunity Commission. "Background Checks What Employers Need to Know." Accessed April 16, 2020. 

  4. Federal Trade Commission: Consumer Information. "Fair Credit Reporting Act." Accessed April 16, 2020.

  5. Federal Trade Commission. "Fair Credit Reporting Act." § 605. (a) Information excluded from consumer reports. Pages 22-23. Accessed April 16, 2020.

  6. Federal Trade Commission. "Fair Credit Reporting Act." Disclosure to Consumer. Page 13. Accessed April 6, 2020. 

  7. Federal Trade Commission. "Using Consumer Reports: What Employers Need to Know." Complying with the FCRA. Accessed April 16, 2020.