Background checks are a standard procedure in modern business used to verify an individual’s identity, credentials, and history. This process allows a business to make hiring and placement decisions with a greater degree of certainty. When conducted correctly, these checks provide the necessary data for informed decision-making and serve as a mechanism for reducing organizational risk across various operational areas.
Protecting People and Assets
A primary function of pre-employment screening is to establish a secure environment for the workforce and the public the business serves. By identifying individuals with a history of violent behavior or certain offenses, a company can proactively prevent incidents of workplace violence. This measure is significant for roles involving direct interaction with vulnerable populations, such as in healthcare or educational settings.
Background checks also safeguard sensitive company assets, including proprietary data like trade secrets and production methods. Screening can reveal past misconduct that indicates a potential for data theft or espionage. This is relevant for positions with access to customer lists, financial data, or computer system passwords, ensuring employees handling confidential business knowledge have demonstrated integrity.
Ensuring Quality and Integrity in Hiring
The thoroughness of a background check correlates with the quality and long-term stability of a company’s workforce. Screening verifies the integrity of the information presented by an applicant, confirming that claimed educational degrees, professional certifications, and licenses are authentic and valid. Misrepresentation on applications can lead to a skills gap that impacts team performance and customer service.
Confirming a candidate’s previous employment history, including job titles and tenure, ensures they possess the foundational experience required for the role. This vetting process leads to a higher quality of hire and helps stabilize the workforce. Lower turnover reduces the costs associated with continuous recruitment, onboarding, and training, contributing to improved operational efficiency.
Mitigating Financial and Reputational Risk
Background checks serve as a defense against financial misconduct, fraud, and embezzlement, particularly for positions with fiduciary responsibility or access to sensitive customer data. A history of financial mismanagement or theft indicates an increased risk of internal fraud, which impacts a company’s bottom line and client trust. Companies with comprehensive screening policies report a decrease in incidents of internal theft and fraud.
Failing to conduct a reasonable investigation exposes a business to the risk of a “negligent hiring” lawsuit. An employer can be held liable if an employee harms a third party, and the employer knew or should have known the employee posed a risk to others. Lawsuits resulting from negligent hiring can lead to severe financial consequences if an employer failed to uncover relevant information. Maintaining a diligent screening program safeguards the company’s financial stability and public image.
Navigating Legal and Regulatory Compliance
Compliance with federal and state regulations is an unavoidable aspect of conducting background checks, particularly for businesses operating in highly regulated sectors. Many industries, such as healthcare, finance, transportation, and government contracting, have mandatory requirements for specific types of screening due to the sensitive nature of their work. Financial institutions often require credit history checks, while healthcare providers must verify professional licenses and look for certain criminal history flags.
The federal Fair Credit Reporting Act (FCRA) governs the use of consumer reports, which includes most third-party background checks, and establishes strict procedural requirements for employers. Before obtaining a report, an employer must provide a clear and conspicuous written disclosure in a stand-alone document and obtain the applicant’s written authorization.
If an employer contemplates “adverse action,” such as denying employment based on the report, they must follow a two-step process. This involves sending a pre-adverse action notice with a copy of the report and a summary of the applicant’s rights, allowing time for the applicant to dispute inaccuracies before a final adverse action notice is issued.
Employers must also adhere to guidelines set by the Equal Employment Opportunity Commission (EEOC) to prevent discriminatory practices. The EEOC advises against using blanket policies that automatically exclude applicants with a criminal record, as this can lead to an unlawful “disparate impact” on protected groups. Any exclusion based on criminal history must be job-related and consistent with business necessity, focusing on the nature and severity of the offense and its relevance to the specific position.
Different Scopes of Background Checks
Background screening encompasses several distinct investigations, each providing a different facet of an applicant’s history and suitability.
- Criminal History Checks: These checks delve into local, state, and federal records to identify past convictions or pending charges. This is fundamental for assessing risk, especially for positions involving public trust or vulnerable populations, and the scope is often tailored to the specific legal requirements of the industry.
- Employment and Education Verification: This confirms the accuracy of credentials listed on an application, including dates of attendance, degrees conferred, and previous job titles and dates of employment. This step directly validates the skills and experience claimed by the candidate.
- Driving Record Checks (MVRs): These are necessary for any position that requires operating a company or personal vehicle for business purposes, revealing traffic violations and history of unsafe driving.
- Credit Checks: These provide a summary of a candidate’s financial history. Their use is heavily regulated and generally permissible only for roles involving handling significant sums of money, access to sensitive financial data, or fiduciary responsibilities.
- Reference Checks: These involve directly contacting former supervisors or colleagues to gain subjective insights into the applicant’s work ethic, professional conduct, and overall fit within a team environment.