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5 Tips You Need To Know About Employee Background Checks

What to do with a background check

Employee background checks are a useful and eye-opening tool for any size business. Why? They can help with your hiring choices, promotion decisions, or employee transfers.

Once you have used an employee background report, it is easy to just place them in a file and forget them. But, like most aspects of business, the handling of background checks is subject to government rules.

Click here to go directly to the EEOC's website to read, "Employee Background Checks - What Employers Need To Know.

Two Federal Agencies Outline How to Properly Conduct an Employee Background Check and Then How to File Them

The Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) both regulate federal laws and regulations that apply to businesses conducting background checks. The EEOC monitors the use of background checks to reduce discrimination, and the FTC enforces the Fair Credit Reporting Act (FCRA), (which gives employers guidelines for background checks.)

5 Tips to Properly Conduct a Background Check:

Tip #1: Keep the Person Informed About the Background Check

You must inform your potential employees that you intend to run a background check on them when submitting an employment application and notify them how it will affect your decision to hire them. This information must be supplied separately and not buried in an application or agreement.

Tip #2: Get Written Consent

It is important to make sure all potential employees (or current employees) consent to you conducting a background check on them. That said, here are two points to review:

  • It is acceptable to consider only applicants who will submit to a background check.
  • If a potential employee refuses to consent to a background check, this might raise some red flags.

Tip #3: Consider an Investigative Report for High Profile/Risk Positions

Investigative reports are more thorough background checks that include inquiry into the character and reputation of the candidate. This information is gathered through interviews with the applicant's acquaintances; therefore, these reports are more costly to obtain than an average background check. You must share the results of an investigative report with the employee if he or she requests this information.

Click here to read the FCRA's article, Using Consumer Reports: What Employers Need to Know.

Tip #4: Inform Applicants if Their Report is Unsatisfactory

If you decide against hiring or promoting candidates based on their background check report, you must inform them and provide a copy of the report. Additionally, you must discuss the information with them before your final decision (as well as provide them with a copy).

Click here to get a copy of the FTC's report: A Summary of Your Rights Under the Fair Credit Reporting Act

Tip #5: Know what Constitutes Discrimination

The EEOC's function is to keep employers from using background check information in a discriminatory manner. Be sure to comply with the guidelines laid out by this organization regarding race, sex, religion, disability, age, or medical history.

Various Types of Background Checks:

We have compiled a list of information that other employers often consult as part of a pre-employment check. As always, consult with HR professionals or an employment law attorney to ensure your business is following your governing laws.

  • Credit reports
  • Criminal records
  • Lie detector tests
  • Medical records
  • Military service
  • School records
  • Workers' compensation records

Here are two IMPORTANT warnings from the EEOC:

  • When basing employment decisions on background issues, employers should not use a policy or practice that excludes people with certain criminal records if the policy or practice significantly disadvantages individuals.
  • You must be open-minded when a person's disability could affect his or her role or performance; therefore, it is recommended for the job applicant to demonstrate his or her ability to do what is required for the position.

Executive Summary

The information you gain from a background check can be invaluable to your business. Be sure to keep applicants and current employees informed about their rights concerning background checks. Take advantage of investigative reports and additional background information when considering applicants for high-profile positions and promotions. Remember to follow EEOC and FCRA guidelines linked in this article to help avoid trouble incorporating this useful tool into your hiring and promoting process.

Questions?

For more information about this topic, contact Cindy McSwain using her information below.

Cindy McSwain

Senior Vice President
Outsourcing Services

Cindy McSwain leads AGH’s outsourcing services group. Her team provides payroll, accounting, funds disbursement, controller, and other financial outsourcing services to numerous clients throughout the U.S. Prior to directing the outsourcing group, Cindy served AGH’s audit clients for 10 years, working with a wide range of middle-market, closely held and family-owned clients.

Her current clients cross many industry sectors, including manufacturing, distribution, restaurants, retailers, medical, and not-for-profit. She has participated in numerous SEC filings and public registrations and has experience in mergers and acquisitions. Cindy is a certified public accountant and a member of both the American Institute of Certified Public Accountants and the Kansas Society of Certified Public Accountants.

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