How To Implement a Compliant Employment Background Screening Program

10 Powerful Recommendations for a Compliant Background Screening Program

When an employer decides to hire or promote an employee, they should have a non-discriminatory legally compliant background screening program in place. Not only does this help employers ensure they are hiring the right person for the position, it also limits their organization’s exposure to negligent hiring claims.

Recommendation #1

Are background checks legal?

Yes. The Fair Credit Reporting Act (FCRA) was enacted October 26, 1970 to regulate how employers use public record information (i.e. court records, driving records, verification, etc.) on background screening reports.

Consumer Reporting Agencies (CRA) are entities that collect and disseminate information about consumers to be used for employment purposes. CRAs have responsibilities under the FCRA which include:

Providing consumers with information about him or her in the agency’s files and taking steps to verify the accuracy of information disputed by the consumer
If negative information is removed as a result of a consumer’s dispute, it may not be reinserted without notifying the consumer in writing within five days
CRAs may not retain negative information for an excessive period
FCRA describes how long negative information may stay on a consumer’s credit report

Recommendation #2

Why should I have a policy for pre-employment background screening?

Policies are in place to deter any claims of discrimination brought against an employer, which includes a background screening policy. By implementing a background screening policy, employers will be able to:

Eliminate claims of discriminatory treatment (i.e. Race, color, gender, etc.)
Foster a safer and more profitable workplace for employees and clients
Set parameters/matrix of disqualifications of employment (i.e. Severity of crime, bankruptcies, etc.)
Compliance with local, state, and federal laws and federal contracts
Outlines specific processes that will be used to perform the background check
Avoid litigation
Reduce operating costs

A compliant background screening program should consist of seven crucial sections:

Purpose of Policy
Scope of Policy
Responsible Organization
Sensitive Positions
Hiring Manager’s Responsibilities
Record Retention
Legal Compliance

Recommendation #3

Why is it a good idea to do background checks?

It is estimated that a negligent hiring claim can cost an organization up to $300,000 in damages. If it is a class action claim, that number can increase into the millions. Now consider that job applicants tend to falsify their resumes and/or job applications. On average, 30% of resumes misrepresent the truth, generally regarding a candidate’s education and employment history.

Here are other advantages of performing employment background checks:

Avoid hiring the wrong person
Cost outweighs the risk (very affordable)
Builds credibility with customers/clients
Reduced rates for workers’ compensation insurance
Saves employers money on training and on-boarding

Recommendation #4

Will the applicant know?

Pursuit to Section 606 of the Fair Credit Reporting Act (FCRA), employers must obtain a signed disclosure and authorization form from the subject (i.e. the applicant) of the report before requesting an employment background check. Providing the applicant with notices explaining their rights under federal and state law is also mandatory.

Applicant will be aware that a background check is being performed on their behalf
Disclosure and authorization form must be completed by applicant prior to initiating a background check
Federal and State notices must be provided to the applicant once they complete the disclosure form
Certain states allow for applicants to receive a free copy of their report if the option is provided on the disclosure form

Recommendation #5

What are the legal ramifications or restrictions for conducting background checks?

In a compliant background screening program, all employment background screening reports must comply with Federal Law (FCRA) and state law where applicable. The Fair Credit Reporting Act (FCRA) states that only certain information can be contained on an employment screening report. For example, bankruptcies that are older than 10 years may not be reported on an employment credit report. Criminal convictions that have been disposed (meaning a verdict was given in the case) that are older than seven years may not be reported on an employment background screening report.

Only records resulting in a conviction or “no contest” plea are reportable
Records are reportable up to seven years from the disposition date (when the case was disposed)
Bankruptcies and collection accounts are reportable up to 10 years
If a criminal case resulted in a prison sentence, the seven year period will start from the date the applicant was released from prison
Criminal records are indexed by a name and date of birth match

Recommendation #6

What information can I search for?

Any public record information bearing on the applicant, including information about their character, general reputation, personal characteristics, and/or mode of living, which can involve personal interviews with sources as neighbors, friends, or associates.

These reports may contain information regarding:

County Level Civil History
Consumer Credit History
County Level Criminal History
Cursory Nationwide Criminal Database Search
Statewide Criminal History
Nationwide Federal Criminal History
Nationwide Federal Civil History
Drivers’ History
Education Verification
Employment Verification
Reference Verification
Statewide Sexual Offender Registry
Social Security Trace
Social Security Verification
Drug Testing

Recommendation #7

Are background checks expensive?
As opposed to the price an organization will pay from a negligent hiring claim, background checks are considered to be very inexpensive. Public record information is rapidly reducing in cost; however, employers must still be cautious and carefully review the information provided by their background screening vendor. Accuracy of the information contained on the background report should be an employer’s paramount concern when conducting employee screening.

Utilize a “pay as you go” service; do not get locked into a contract or pay excessive set-up fees
True value is in the accuracy of the information received; make sure it is worth what you are paying
Request a complimentary background check to see exactly what you will be receiving
Employers are still held liable if they perform a substandard or “cheap” background check

Recommendation #8

How long does it take to get the information?

The turnaround time of receiving reports depends on the type of searches being conducted. For instance, if databases are being utilized (i.e. nationwide criminal, sex offender registry, and social security trace), the information will come back instantaneously.

If research is required for any searches requested (i.e. county level criminal search, verification of employment/education, and reference check), there will be a longer turnaround time for the information to come back. On average, county level criminal searches take between 24 – 48 hours to complete in most cases. If there are records indicated, the turnaround time may be affected.

Verification of employment and education depend on how the information is stored. For example, larger companies may use a third party system to facilitate the employment verification or education verification process (where in most cases, verification are instant) whereas smaller companies will have their Human Resources Department provide the employment verification.

A compliant background screening program may take either approach.

Request a current average turnaround time report from the vendor
Recognize that some searches may take longer than others (i.e. Verification vs. Instant Database)
Vendor should provide a daily status report showing their efforts in completing pending reports
Utilize a vendor that offers online ordering and retrieving of reports

Recommendation #9

What should I look for in a third party vendor?

When an employer decides to implement a compliant background screening program, it is imperative that they select the right Credit Reporting Agency (background screening vendor).

Below are qualities that employers must look for when deciding on a background screening vendor:

Screening vendor is compliant with Federal and State Laws
Compliant disclosure forms, releases, and notices
Secure software for ordering, retrieving, and storing reports
Licensed to retrieve public records
Legally compliant reportable results
Affiliation with trade organizations
Disclaimer regarding database searches
Full knowledge of the adverse and pre-adverse action process
Client references
Better Business Bureau (BBB) member
Provides value added services

Recommendation #10

Can background checks be conducted in-house or is it better to do them through a third party vendor?

Just like with any other professional service, organizations should “leave it to the experts.” When it is a dynamic and fluid field such as employment background checks, hiring a third party background screening organization to perform background checks should be a no brainer for businesses.

Here are a few reasons why utilizing a third party background screening organization will benefit a business:

Educated on Federal and State laws pertaining to background checks
Licensed in states that require an private investigator license to pull public records
Accuracy of the information will be reviewed and vetted for compliance
Cost effective and saves your organization the time from conducting background checks
Reduces claims of discrimination

Companies that fail to implement a non-discriminatory legally compliant employment background screening program are risking the safety of their employees, property, and their business overall. Due to the slow “recovery” of the U.S. economy, employers must be proactive in taking steps to ensure the growth and sustainability of their organization.

This means hiring the right person for the right position, which can only be achieved by conducting thorough employment background checks.

Hire a qualified Consumer Reporting Agency to help your organization develop a compliant background screening program, procure compliant Federal and State background checks, and make a well-informed hiring decision.

About the author

George Ramos