Background Checks 101

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Back to the Basics: What is a Background Check?

A background check is a legal investigation into a candidate’s past in order to verify that a person is who they claim to be, as well as provide an opportunity to check a person’s criminal record, education, and employment history.

Employers often turn to Consumer Reporting Agencies, or CRA’s, to acquire the information contained in a background check.

All background checks must be run in compliance with the Federal Trade Commission and the Fair Credit Reporting Act.

Why Run a Background Check?

Ensuring Qualified Employees

In a tight employment market, it may be appealing to job-seekers to enhance their job history and qualifications. A background check helps employers ensure that the applicant is qualified for the position.

Workplace Safety

Employers are responsible for their employees’ safety and welfare at work. Conducting a background check helps mitigate the risk of violent or disruptive behavior in the workplace.

Decreasing the Risk of Theft and Fraud

The majority of business theft and fraud is done by employees of the business. A background check reduces the risk of theft by helping employers make informed decisions during the hiring process.

Reducing Turnover

The average cost per hire is $4,129. By verifying that the information provided on an applicant’s resume is true, a company is more likely to fill the position with the right candidate. This way, there is a higher chance of the employee enjoying the position and staying around longer, meaning a company will spend less money trying to find and hire their replacement.

Types of Criminal Searches

“National” Criminal Records Search

Aside from the case of sex offenders, there is no legislation that requires states or counties to report their records to the national database, so there is a much higher chance of missing a criminal record if an employer is relying solely on this type of search. There is also a higher chance for information mismatch, especially for candidates with common names.

State and County Criminal Records Search

Because the majority of criminal cases are tried at the jurisdictional level, that is also the best place to find the most complete and accurate records. It’s a good idea to run a county check in each of the counties that a candidate has lived, if they have lived in any of the dark blue states on the map below.

Sex Offender Records

With over 900,000 registered sex offenders in the US today, the reason for running a sex offender record search on a potential employee is obvious.

In the service industries where employees are entering customers’ homes or interacting with children, these checks are strongly recommended and may even be required by state law.

Global Watchlist

The Global Watchlist is a combination of over 60 national and international databases that includes the FBI Most Wanted Lists, Office of Foreign Assets Control, and more. There are also many other industry-specific databases, such as the Nurses’ Abuse Registry.

Motor Vehicle Reports

An MVR is important for companies that have employees driving for work, or driving company vehicles. They can also confirm basic identity information (their legal name, date of birth, and address), as well as report moving violations, accident history, driving record, and DUI convictions.

FCRA Compliance

The Fair Credit Reporting Act requires that all employers abide by a specific process in order to avoid discrimination, protect employees’ rights, and obtain only information that is both relevant and accurate.

Provide Written Disclosure.

All candidates must understand that they will be screened and that any results within the report may be used in making decisions around hiring, promotions, or retention.

Obtain Consent.

All employers must get written authorization from the candidate before screening them.

Provide Information.

Employers must provide the candidate with information about the agency conducting their background checks, along with their rights as an applicant under the FCRA.

Adverse Action Notice

For an employer to reject an applicant based on their background check, the last step they must take in order to be in compliance with the FCRA is to give the applicant an Adverse Action Notice.

After a reasonable amount of time, if the applicant hasn’t appealed the Pre-Adverse Action Letter or provided reasonable explanation of the information in the report, the employer must provide written notice containing the following information:

  • Statement that the adverse action is based either in whole or part on the information in the report provided by the Credit Reporting Agency (CRA)
  • Notice of the applicant’s right to dispute the accuracy or completeness of the report
  • Name, address, and phone number of the CRA they used
  • Notice of the applicant’s right to another free consumer report provided by the CRA within 60 days

Opportunity to Dispute

If an employer is leaning towards rejecting an applicant based on their credit report, they must inform the applicant before the decision is made.

The employer is obligated to send a Pre-Adverse Action Letter, including a copy of the report used and a summary of the applicant’s rights.

If there are inaccuracies on the report, the applicant then has the opportunity to dispute the information.

At this point, the employer must wait a reasonable period (usually 3-5 business days) before they proceed with their rejection. The goal is to allow the applicant to explain the red flags on the report, or, if the negative information is incorrect, dispute and correct the report.

If any charges on the report are disputed, the CRA will provide an updated report to both the applicant and the employer.

If an employer follows all steps in conducting the background check, then adverse action can be completed. A final employment decision will be made, and if adverse, the employer must send a final adverse action notice.

What’s at risk if a company isn’t FCRA-compliant?

If an employer isn’t compliant with the FCRA, they run the risk of hefty fines and lawsuits.

In 2017, McDonald’s settled a class-action lawsuit for $950,000, after it was discovered that they were not giving their applicants proper notice and the opportunity to dispute their reports.

Other companies that were slammed with class-action lawsuits over FCRA compliance:

  • Walmart is currently facing a lawsuit that was first filed in August of 2017
  • Delta Airlines paid $2.3 million in January of 2019
  • Omnicare paid $1.3 million in August 2018
  • PepsiCo paid $1.2 million in July 2018
  • Frito-Lay paid $2.4 million in April 2018
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