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6 Tips for Employers on Conducting Background Checks

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Background checks are a critical tool for employers to help avoid liability for negligent hiring—but navigating myriad U.S. federal, state, and local laws that govern such investigations can be a difficult task. 

Why do employers typically get sued for negligent hiring? Because they knew or should have known about an employee’s potential to cause harm, said Lester Rosen, an attorney and the CEO of Employment Screening Resources, a background screening firm based in the San Francisco Bay Area.

“The background check is not to tell you who to hire but who not to hire,” he said during a concurrent session at the SHRM Talent Conference & Expo 2022 in Denver, Colorado, on 12 April.

If you don't do background checks at all or don’t do them correctly, you’re likely to become the defendant in a lawsuit, he said.

Here are six tips that employers should keep in mind during the hiring and screening process. 

Check for Potential Issues from the Start

Carefully review the application with a critical eye, Rosen said. Did the job applicant sign the application and release, identify past employers and supervisors, and explain why he or she left past jobs or has employment gaps?


Use an Accredited Background Screening Company

Not all background screening firms are created equal, Rosen noted.

In 2010, the Professional Background Screening Association (PBSA)—which was formerly called the National Association of Professional Background Screeners—created the Background Screening Agency Accreditation Program (BSAAP).

“Governed by a strict and thorough set of professional standards of specified requirements and measurements, the [BSAAP] has become a widely recognized seal of approval bringing national recognition to an employment background screening-affiliated organization for its commitment to achieving excellence through high professional standards with accountability that results in continued institutional improvement,” according to the PBSA website.

Simplify the Screening Process

Make sure your screening system is intuitive and user-friendly, Rosen said. The process is generally initiated in one of the following ways:

  • The employer sends a text or e-mail through the screening firm, which directs applicants to a website where they can fill out the necessary information.
  • An applicant tracking system (ATS) is used to automate the recruitment and hiring process and provide hiring managers with tools to manage the process.

Rosen said the ATS should be able to connect to screening firms with a simplified and intuitive applicant process.

Beware of FCRA Class-Action Lawsuits

The federal Fair Credit Reporting Act (FCRA) regulates employment screening and outlines consent, disclosure, and notice requirements for employers that use third parties to conduct background checks on job applicants and employees.

FCRA compliance involves “a lot of byzantine steps,” and many U.S. states have their own additional requirements, Rosen noted.

Under FCRA, claimants in a class-action lawsuit can ask for damages of $1,000 per person, which Rosen said can add up quickly. Additionally, claimants commonly ask for attorney’s fees, court costs, and punitive damages, which are meant to punish the employer and deter future wrongdoing.

Class-action participants may pursue penalties for basic FCRA violations, such as failing to use FCRA forms or provide applicants with proper notice before making an adverse decision based on the results of the investigation.

“Millions and millions of dollars have exchanged hands because of these things,” Rosen said. He suggested that employers ensure all their forms have been reviewed by legal counsel, because it’s ultimately the employer’s—not the screening firm’s—duty to use compliant forms.

Review Requirements of “Ban-the-Box” Laws

A number of states, counties, and municipalities have some form of “ban-the-box” laws that prohibit employers from asking about criminal history on job applications. Employers in these jurisdictions must wait until a later point in the hiring process to ask.

These laws are meant to combat the stigma attached to incarceration. Rosen noted that employment is the number one tool used to reduce recidivism—the tendency of a person with a criminal record to reoffend.

Understand Limits on Credit and Salary History Inquiries

“Don’t use credit reports across the board,” Rosen said. Some U.S. states prohibit the use of credit reports for hiring decisions, and others have very specific rules on how employers can obtain and use such reports.

Employers should be able to show the business necessity and job relevancy of credit history information.

Additionally, employers should be aware of state and local laws that ban or limit questions about salary history. Determining a new hire’s pay based on prior compensation may perpetuate disparities, Rosen explained.

These laws are meant to combat gender discrimination and other forms of bias that result in pay inequity.

Lisa Nagele-Piazza, J.D., SHRM-SCP, is senior legal editor for SHRM, covering state and federal employment law developments for SHRM Online. ​​Follow her on Twitter at @LisaPiazzaSHRM.

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