So, you’ve posted the job, sifted through the stack of resumes, and now you’ve narrowed your applicants to a handful of potential employees. It is regular practice for
companies and small business owners to background checking their employees. Credit reports, criminal records, even social media accounts have been used in the process of background checking for any potential red flags when hiring.
Did you know you could get sued for background checking even if you never even make a hire? Before pursuing any background checks or making hiring decisions based on the results, you should be wary of some potential pitfalls and liabilities. The following is a need-to-know summary of the law for any employer considering background checks for employees and applicants.
First things first. Why would I want to background check employees?
Despite the risks, background checking can be a valuable way to screen employees, identify risky hires, and avoid individuals whose past behaviors could negatively impact your business. You don’t want to hire a thief or someone who has a violent history. Background checking is one way to find out who you do or don’t want in your workplace.
What is the best way to get a background check?
There are a number of for-fee background checking companies that will provide you with a full report of including public records, criminal records, work history, education, financial history, and personal information available on social media. Employers will often use this service for hiring, retention, or promotion of their current employees. Remember that you will need to get written consent from any applicant before performing a background check.
How much does a background check cost?
A background check can be anywhere from $10 to several hundred dollars depending on how much information is provided. You can limit the costs by only performing a check on individuals you already plan on hiring, rather than all of your applicants.
Are background checks legal?
It is perfectly legal to pursue a background check on an employee. The dicey part is what information you are seeking and what information you decide to use when making a hire. There are restrictions related to medical history and genetic information and of course, any information that could be considered discriminatory is off-limits (information related to race, gender, sexual identity, pregnancy, religion, age, etc.—the hot buttons). You are also responsible for following FCRA rules about notice but we will get to that later.
So, you get the report…
If you are considering a hire and reviewing a background check, you may be interested in knowing whether the individual has significant debt or hasn’t paid their taxes. An individual with a violent history could also be a no-go. Social media accounts have recently been used to illustrate risky behaviors, racist ideologies, and to illicit information that may be useful to potential employers. On the other hand, you may like what you see: a perfect record. Great, make the hire.
And if you don’t like what you find…
This is where things get a little sticky. If you decide not to hire employee because you don’t like their race, religion, age, gender, or other protected trait, you could face a discrimination lawsuit. If you decide not to go with a certain employee because of what you turn up in a background check, you have a duty under federal law to inform the employee of your decision. The Fair Credit and Reporting Act (FCRA) oversees credit reports generated by these third-party companies. The FCRA has very specific requirements concerning background checks. You must inform the potential hire and get written permission before you perform a background check, provide notification of any adverse decision, and give the applicant time to rectify any errors in the report. In addition to compliance with the FCRA, you should also review local and state laws related to background checking for employment purposes.
If you background check some, you must background check all.
Don’t make the mistake of only background checking a certain group of applicants. For example, if you only ask people of a certain race about their financial history, you are most certainly violating anti-discrimination laws. If you decide that you want credit and financial history of your potential hires, make sure that you ask for that information from all your potential hires. The Equal Employment Opportunity Commission (EEOC) regulates instances of discrimination. Any disparate treatment in how and who you background check could be seen as evidence of discrimination.
Be smart about using the information gathered in a background check.
To avoid lawsuits, make sure that you apply the same standards to all of your applicants. If you don’t reject applicants of one ethnicity with certain financial histories or criminal records, you cannot reject other applicants of a different ethnicity because of those same histories. Be careful when you base a hiring decision on background information that could be more common among individuals of a certain ethnicity, origin, sex, religion, or age.
You are responsible for keeping and disposing background information.
After a background check is performed, all personnel or employment records must be preserved for one year after records were made or after a personnel action was taken, whichever comes later. In the event that an employee files a charge of discrimination, you must maintain records until the case is resolved. Once you have satisfied requirements for notification and recordkeeping, you can dispose of background reports but you must do so securely. You can’t just toss them out with the trash—they must be shredded, burned, or pulverized to the point that they cannot be read or reconstructed.
Is it worth the hassle?
So, considering the costs of third-party services, all the notification and legal requirements, and the additional time it takes to review reports—is it worth it? Depending on your business, a background check may be more necessary than just worth it. For example, if you are hiring for care of minors or the elderly or need individuals to be responsible for property, a background check could prevent against personal or financial harm. When employee duties involve handling cash, providing financial services, entering homes, or providing medical care, a screening of candidates is critical to reduce and additional liabilities for failing to perform “due diligence” in hiring.
Are there cheaper alternatives to background checks?
In some cases, you may not need the full background check. You could choose candidates based on referrals from reliable sources like friends or colleagues rather than an online post without any vetting. There are also non-profit workforce development firms that help the long-term unemployed and screen candidates in advance. If you are a small business owner with a limited budget looking for casual employees, you may not need to invest in third-party background checks.