For many employers, background checks are an essential step in the hiring process.  There are, however, many risks associated with conducting background checks that employers should be aware of when embarking down this path.

1. Understand the regulatory environment

Regulatory enforcement and litigation efforts are increasingly focusing on the privacy and non-discrimination rights of applicants and employees. Already adopted by many states and cities, the “Ban the Box” movement, which seeks to eliminate questions about past criminal conduct on initial job applications, is on its way to becoming a national standard. Similarly, ten states have enacted laws prohibiting employers from acquiring credit information on applicants and employees unless the information is “substantially job related”, and similar bills are pending in 35 states.  Even more stringent legislation has been introduced at the federal level.

2. Assess position and business relevance

In light of the regulatory environment, businesses should establish background check policies that center on business necessity and relevance to specific jobs, and apply these policies consistently.  Before rejecting a candidate because of a criminal history, employers should consider factors such as the nature and gravity of the offense, the time that has passed since the offense and/or sentence completion, and the nature of the job.  If you are in a geographic area that allows credit checks (beyond when the information is “substantially job related”), it’s still important to proceed with great caution as this practice is increasingly becoming disfavored unless a credit check is job related.

3. Avoid employer negligence

Employers should be beware of risks of negligence claims related to when they do and do not use background checks.  Background checks are required for some jobs, such as ones that involve contact with children, the elderly or disabled persons.  Knowingly hiring an applicant that is not suitable for a position or failing to conduct a background check for these and other positions place an employer at risk if that employee later contributes to an unsafe work environment or endangers others.  Employers may place themselves at similar risk when employees are hired or promoted into positions with fiduciary responsibilities without first conducting a background check to verify there is no history of fraud.

4. Inform, inform and then inform again

Federal law requires employers to provide a series of notifications when they chose to conduct a background check.  First, the employer must inform the applicant of their intent to run a background check that may be used in the process of deciding whether to offer employment. This step also must include obtaining permission to conduct the background check through a dedicated consent form with specific language.

If an employer plans on denying an applicant based on the background check results, the employer must provide the applicant notice of his or her rights under the Fair Credit Reporting Act (FCRA), a copy of  the background report, and notice that the report contains information that may be used as a basis for an adverse employment decision.  The applicant should be afforded an opportunity to correct, explain or refute any information contained in the report.  While employers are not required to accept or verify any additional information provided, they should listen to and evaluate the applicant’s response, as a showing of good faith.

Once the applicant has responded or a reasonable amount of time has passed without response, an employer needs to inform the applicant of their final decision (verbally or in writing).  The employer also must provide details about the organization that conducted the background check, and notice of additional rights under the FCRA. Then, the employer should destroy the report such that it cannot be reconstructed or read.

5. Use a qualified provider

Given all the potential pitfalls surrounding background checks, employers should hire a credentialed company to conduct them, rather than try to do it themselves.  A good background screening company can guide you through the process, ensuring compliance with federal and state laws and providing guidance on employer responsibilities as a user of background check reports, required notices and forms, and guidance when faced with potentially needing to make an adverse action decision based on a report.  A reputable company also provides some assurances that the information obtained is verified and complete.