Why Should An Employer Conduct Background Checks

With the public focus more and more on hiring decisions at all levels, at my company, Securit® (www.secur-it.com), the number of requests for background checks has been steadily rising over the past 18 months.  Employers utilize the services of companies that perform background checks to verify the accuracy of information provided by the candidates.  Background reports can also uncover information left out of the application or interview. 

Today, more employers are being sued for "negligent hiring" for not checking carefully enough into the background of a potential employee. If an employee's action hurts someone, the employer may be liable for damages, even if the employee’s transgressions were outside the scope of employment. That is one reason more background checks are being conducted.   R. Craig Scott, an attorney in California authored an article published by the American Society for Personnel Administration where he stated that “Employers really are at risk, and across the country they don’t understand that risk”.   The states where courts have recognized the doctrine are Alabama, Alaska, Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Louisiana, Maryland, Michigan, Minnesota, Missouri, New Jersey, New Mexico, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah and Washington.

What kind of information might be included in a background check?

Background reports can range from a verification of an applicant's Social Security number to a detailed account of the potential employee's history and acquaintances. Some of the pieces of information that might be included in a background check are: driving record, criminal record, education record, property ownership, bankruptcy, employment verification, credit records and more. However, the employer is required to get your permission before obtaining the records.  (NOTE:  Many of these sources are public records created by government agencies.)

What types of information can't the employer consider?

Federal and state laws limit the types of information employers can use in hiring decisions. One example would be a workers’ compensation claim.  A report on a background check for Workers’ Compensation would show accident dates and types of injuries for all workers’ compensation claims.  However, it must be used within Americans with Disabilities Act (ADA) guidelines.   When an employee's claim goes through the state system or the Workers' Compensation Appeals Board, the case becomes public record. Only if an injury might interfere with one's ability to perform required duties may an employer use this information. Under the federal Americans with Disabilities Act, employers cannot use medical information or the fact an applicant filed a workers' compensation claim to discriminate against applicants. (42 USC §12101). 

What can former employers tell you?

Often a potential employer will contact an applicant's past employer(s).   The former employer can say anything [truthful] about your performance. However, most employers have a policy to only confirm dates of employment, final salary, and other limited information.

Does the prospective applicant have a right to be told when a background check is requested?

Yes. Amendments to the Fair Credit Reporting Act (FCRA, 15 USC §1681), in effect September 30, 1997, increase the disclosure and consent requirements of employers who use "consumer reports." Such reports might consist only of a credit check. For more extensive reports which might include criminal histories, driving records and interviews with neighbors, friends and associates, you must obtain the prospective applicant’s written authorization before it is conducted.

The Benefits

The benefits to conducting the background check may differ depending on what industry you are in.  Some of the benefits of background checks can result in:

• A better workforce
• Less turnover
• Better quality applicants
• Lower shrinkage (internal theft)
• Safe workplace by avoiding hiring employees with a violent history
• Reduce litigation
• Less time spent in terminating an employee
• Lower insurance premiums (drivers with no convictions, suspensions or accidents)

In Summary

If you are going to perform background checks on prospective employees you should follow these simple guidelines:

1. Inform all prospective employees that it is your policy to conduct pre employment background checks.
2. Make sure background checks are done on all prospective employees, otherwise it can be interpreted as discriminatory practice. 
3. You should draw up an authorization for the prospective employee to sign, allowing the release of this information to you.
4. Contact a licensed investigations firm to perform these background checks and make sure you are provided with a written report, which should outline the information found on each prospective employee. 

The cost of the background check is negligible when compared to the benefits.  Pre employment screening is an effective risk management tool that has been proven to significantly reduce the risk of a bad hire.