How to do an employee background check

Photo by La Miko

Originally Posted On: https://quickbooks.intuit.com/r/hiring-and-recruiting/employee-background-check/

You want to hire the best possible employees for your open positions. Background checks may help you make the right decisions. But you must use them appropriately to serve your business objectives and comply with the law.

A background check is an investigative process in which a third party researches a potential employee’s past. Background checks can cover employment history, education, criminal records, credit reports, driving records, license checks, and more.

A background check in the hiring process serves two functions. First, it allows you to validate whether a job applicant is who they say they are. Second, it allows you to review details about the applicant’s history to determine if they pose any potential risks to your company, employees, and customers. Although background checks in hiring have long been controversial, studies show that 95% of employers continue to perform them.

In most industries, background checks are not legally required. But they can provide some value.

Background checks can help ensure a safe workplace for your employees and customers. As an employer, you are responsible for providing a safe work environment for your employees as well as those who may visit your workplace.

Your employees operate your business every day. You rely on them to perform their duties honestly. If a candidate has a record of repeated dishonest behavior (e.g., theft, fraud, embezzlement), a background check can uncover this history.

A candidate’s past may not disqualify them from a position completely. But a background check may allow you to place them in a closely monitored role or away from sensitive company property.

58% of hiring managers surveyed by CareerBuilder indicated they’d found lies in resumes. Background checks can help identify false reports and ensure that your hiring managers evaluate candidates with accurate information.

Every employee you hire in the U.S. must be authorized to work in the country. In certain industries (e.g., commercial driving), employees must be certified and in good standing to perform their job duties. Background checks can help identify whether your job applicants are authorized to work in the roles they applied for. Let’s say, for example, a commercial driving applicant has a suspended license. A background check can prevent you from hiring an applicant for a job they can’t perform legally.

Background checks can help to uncover problematic pasts. However, past mistakes aren’t always indicative of future behavior. When reviewing a background check, it’s important to consider a number of factors, including the nature and gravity of the offense, the time that has passed, and the nature of the job that is being sought. Keep this in mind as you consider how deep to dig into your background checks and how you assess the report.

It might seem helpful to understand absolutely everything about a candidate during the interview process. However, too much information can be a bad thing. After all, what job applicant hasn’t made a bad decision at some point? Further, you can only lawfully consider certain background information based on the position a candidate applied for.

Background checks may include:

• Credit information
• Criminal records
• Educational records
• Employment records
• Military records
• Bankruptcies
• Civil court records
• Driving records
• Tax liens
• Licensing records
• Workers’ compensation records
• UCC filings (e.g., liens and financing statements)

The above list should give you an idea of the information available. But that doesn’t mean you should look into all of these records in your background checks. The only background check results you can use against a job applicant is information directly related to the position they’ve applied for.

For example, assume you run credit checks as part of your background check process. Credit scores directly relate only to positions that deal with company funds or financial decisions. Accordingly, credit checks are probably unnecessary for positions outside of finance and executive administrators.

In practice, there may be restrictions as to what you can get from a background check. You can’t make adverse decisions based on protected characteristics. When running background checks, avoid searching for protected characteristics such as:

• Medical histories
• Disabilities
• Genetics
• Age
• Race
• National origin
• Color
• Sex
• Religion

It is almost impossible to conduct a comprehensive background check yourself. For starters, most businesses don’t have access to criminal records databases and credit histories. These are two of the most common sources for background checks. Most companies rely on third-party service providers to conduct background checks.

Consumer report agencies (CRAs) conduct background checks according to Fair Credit Reporting Act (FCRA) regulations. The FCRA is the primary federal law governing background checks, but the FCRA covers much more than credit reports.

FCRA rules apply to any consumer report. Background checks are consumer reports, so FCRA regulations apply to your background check policies and procedures.

There’s no shortage of CRAs to help you conduct background checks. The FCRA lists a number of businesses that qualify as CRAs:

• Credit bureaus (e.g., Equifax, Experian, TransUnion)
• Private investigators
• Collection agencies
• Detective agencies
• Internet and social media background screening services

The CRA you select for your background check will depend on the information you want to learn. If you are only interested in an applicant’s credit history, a credit bureau is all you need. If you want to review criminal records, media mentions, or character references, you need a CRA with a more expansive set of services.

There’s a lot to consider when wading through background check strategies and service providers. But if you break your approach into five steps, you’ll have a good roadmap.

A background check policy is essential for complying with state and federal laws. A policy can ensure that your company requests background checks and uses the results in accordance with the FCRA and various anti-discrimination laws. A policy can also direct managers and human resources departments to give proper notices to job applicants and use background checks consistently.

The policy should include a sample authorization form that candidates must fill out to consent to a background check. The policy can exist as a standalone policy, or you can include it in your employee handbook.

When collecting candidate information, gather what’s necessary for the background check service provider. Typically, that includes basic contact information (i.e., name, address, phone number). It may also include other data to verify a candidate’s identity (e.g., Social Security number, date of birth). Avoid gathering any information that could lead to discrimination (i.e., race, color, religion, sex, gender, national origin, disability).

Note: There are certain states which require employers to provide candidates with an offer letter before a background check can be started. Additionally, certain states have passed “ban the box” legislation, which prohibit employers from asking about a candidate’s criminal history during the interviewing process. Knowing this, it’s important to partner or consult with a CRA or attorney before initiating a background check.

You have a few options for background check service providers. First, make sure your provider promotes its compliance with the FCRA. Additionally, it’s important that the provider advertises compliance with your state laws. Second, you need to pick a provider that can meet your background check needs and offers multiple options.

For example, you may want criminal background checks for all of your employees and credit reports for candidates applying for finance-related positions. You’ll want to find a service provider that offers services to fit your needs.

Next, use a provider that meets your delivery expectations. If you need reports turned around in 48 hours, you may have fewer options. If you prefer results through an online portal, that will impact your decision. Finally, cost is always important. There’s no standard rate in the background check industry. Shop for a balance of service and cost to find a provider that meets your needs.

In the age of social media and cloud computing, more information about candidates is readily available. You may find more potential red flags when running these checks. These red flags don’t necessarily mean a candidate is unhireable. Unless the problematic background is directly related to the job someone applied for, you may not be able to deny them employment. Remember that everybody makes mistakes. It is important that you hear candidates out. Let them explain their history before you make a decision based on something a background report identifies.

When you make a hiring decision based on background check results, you’re answering one question. Does this person’s background disqualify them from working for my company? Then consider the legal implications of your answer. Rejecting a job applicant based on background check findings is an “adverse” action under the law. If you take an adverse action based on a background check, that action must be lawful.

The action must not be discriminatory to comply with the law. And the background-related issue must directly relate to the position the candidate applied for. Under the FCRA, you must give the applicant a copy of the report, the CRA’s contact information, and an opportunity to dispute the report.

As mentioned, you probably can’t run a comprehensive background check without using a CRA. But that doesn’t mean you can’t look into employee histories. You might use social media to evaluate potential employees from a non-technical perspective, but this does have pitfalls. Not all employees use social media, and social media posts can be misleading or misinterpreted.

Your candidate may not be acting in a formal capacity on these platforms. And unless you have guidelines for reviewing social media, you run the risk of discrimination if you’re using a third-party service.

Third-party services can ensure that you approach each background check the same and only review what the law finds acceptable. Further, third-party services can perform background checks more efficiently and identify the sources to meet your background check needs.

Background checks are one of the most widely adopted business tools in the modern hiring process. Understand your options, choose a strategy, create a policy, and start using background checks to hire the best candidates.

CRAs may turn around background checks based on information available through web-based databases in as little as one to two days. CRAs may return checks that take more manual reviews in three to five days. Background checks that require personal interviews and travel can take weeks.

There’s no industry standard for cost, but basic background checks can run between $20 and $40. More extensive searches range from $50 to $150, depending on the information you request. Deeper due diligence that requires in-person meetings and travel can cost thousands.

You can conduct a background check on yourself using the same consumer reporting agencies that businesses use to review job candidates.