3 min read

What Employers Need To Know About Background Checks

Feb 5, 2018 6:30:00 AM

Background Check - Blog.jpgDo you conduct background checks when making personnel decisions?

Background checks can be a helpful tool, but too often we see organizations running checks and not using the results appropriately.

When running background checks, two sets of federal regulations come into play:

  1. When using background information about an employee or applicant to make an employment decision, you are required to comply with federal laws protecting individuals from discrimination, enforced be the Equal Employment Opportunity Commission (EEOC).
  2. Additionally, you are required to comply with the Fair Credit Reporting Act (FCRA), which is enforced by the Federal Trade Commission (FTC).

It is important to understand these federal laws and ensure your procedures are in compliance, otherwise you’re putting your organization at risk for costly and time-consuming claims. We’ll highlight a few best practices below, but we encourage you to take time to review this joint publication from the EEOC and FTC to understand the legal requirements. Be sure to also check if your state has additional requirements regarding background checks.

  • You must receive authorization from the individual before running a check. This needs to be in writing and stand-alone, it cannot be part of an employment application. The FTC has specific rules regarding notification. Compare your current procedures to the FCRA requirements to ensure you are in compliance.
  • Background checks shouldn’t be run until after an offer is made. When you make the offer, have the applicant sign off on a background check release and make the offer contingent on the background check. Too often employers are using background checks in the pre-screen process, but this can open you up to additional risk of discrimination claims.
  • Avoid blanket policies regarding background check results. Anymore, an employer cannot automatically rule out a candidate if, for example, they have a felony on their record. Employers must review results on a case-by-case basis. They must assess each individual and their charges compared to the positions they are applying for. Does the charge impact the applicant’s ability to perform the position? Consider this example. If an applicant has a charge for money laundering, a bank may be justified in using that as a basis for not hiring the individual. However, if the same person was applying for a janitorial job where they would have no contact with money, they should be considered for employment.
  • Document, document, document! In the event of a claim against your organization, having documentation is critical. Even if the claim doesn’t seem to have much to back it up, it is still on you as an employer to prove you were in compliance. Advancements in HR technology, such as an integrated HR platform, can make this a little easier by helping to keep your procedures and signed documents organized.
Some employers find it too burdensome to run background checks that meet all these criteria. But not running these checks at all could be worse. Hiring the wrong individual can be costly and time-consuming in of itself – not only in terms of finding a replacement for a poor hiring decision, but also the potential for lawsuits resulting from that individual’s behavior on behalf of the company. If your organization is to struggling to handle the proper administration of background checks, consider consulting with a trusted advisor who can help run this process for you.

Review your current background check policies and procedures in comparison to federal and state regulations. Not only can the proper administration of background checks help you remain compliant and avoid costly claims, it can also protect your organization from wrong hiring decisions.

Written by Gibson

Gibson is a firm of advisors and consultants that help clients get to the proactive side of insurance. We specialize in working with companies looking to find their edge—where they are growing as an organization, differentiating themselves in the marketplace, and preparing for current and future risk. Together we will find the perfect combination of insurance and consulting.