Legal Considerations when Conducting Background Checks

Background checks are essential in ensuring consistently good hiring decisions. In addition to helping protect company finances and resources, they can serve to ward against negligent hiring lawsuits and unsafe working conditions for other employees and your customers.

But, running background checks isn’t as simple as entering candidate information into a database; it requires some preparation. If executed without the proper care and attention, employers risk liability. Below are the necessary legal guidelines that must be followed when running background checks:

1. Comply with the FCRA. The Fair Credit Reporting Act (FCRA) regulates how employers may obtain and use the information disclosed in background investigations. The Act states that the following information cannot be reported: arrest records; civil lawsuits and civil judgments after 7 years; accounts put in for collection after 7 years; paid tax liens after 7 years; and any other negative information (besides criminal convictions) after 7 years has passed. If employers uncover any of this type of information, they may not use it in making an employment decision.

2. Adhere to the EPPA. The Employee Polygraph Protection Act (EPPA) prohibits the use of polygraph tests by private employers except under specific, limited circumstances. For instance, applicants for positions that are within federal contracts with defense, national security, or federal law might be required to pass a polygraph test prior to employment. It is important to determine your company’s position as it relates to the EPPA as well as any applicable state regulations in this regard.

3. Establish a screening policy. Before conducting background investigations, you should have a published policy on the process. A policy on background checks should indicate when the checks will be conducted, for which types of positions, and the kinds of information that will be collected. The policy should reflect the employer’s effort to balance its “need to know” with employee privacy rights. For a sample policy on background checks click here.

4. Examine application materials. Review of the employment application should be the initial step of the screening process. You should be utilizing the employment application as a means to weed out candidates, to verify information during an interview, and to look for inconsistencies or employment gaps. When inaccurate or undesirable information is found early in the hiring process, it saves you the time and money involved in interviewing and screening an applicant that just isn’t a good fit.

5. Obtain written consent. All employment applications should include a statement above the applicant’s signature line summarizing the specific types of background checks that may be conducted. A separate document requesting authorization to conduct background checks may also be a good idea. This way applicants and/or employees are aware of exactly what they are agreeing to.

6. Run only job-related checks. The type of background check an employer conducts must depend on the parameters of the position, and therefore, needs to be job-related. For instance, an applicant applying for an administrative assistant position, in which the individual is not expected to operate a company vehicle, should not be subject to a driving record check.

7. Be consistent. So as to avoid claims of discrimination, employers must never conduct background checks on a selective basis. All similarly situated applicants - those applying for the same or similar positions - must be subject to a background investigation prior to receiving an offer of employment.

8. Ensure confidentiality. Employers must maintain the confidentiality of all background check information. Train all professionals that will be handling or reviewing background reports on the importance of preserving its confidentiality. In addition, keep all records under lock and key at all times.

Before diving into the screening process employers should be sure they have a clear policy on background checks, that they have adequately used the employment application as a screening tool, and that they have obtained consent prior to running background investigations. Additionally, keep in mind that background checks should never be run on an inconsistent basis and all practices surrounding their use must be compliant with state and federal screening regulations.