Do’s Don’ts and How To’s of Employment Background Checks

Photo of Linda Johnson
Linda S. Johnson
Director, Litigation Department and Vice Chair of Education Law Group
February 1, 2008

In an era when employee violence, embezzlement, and ethical violations are becoming too common a media headline, companies are increasingly using employment background checks to help ensure that they hire the best employee and provide a safe and secure work environment. In deciding whether to conduct a background check, or how extensive a check to be done, a company must ensure that its procedures are carried out fairly and are in compliance with the law.

There are several types of background checks that can be done to assist a company in choosing the best candidate. Such checks can include credit history reports, criminal background checks, motor vehicle record checks, verification of prior employment with former employers, and verification of educational credentials.

The purpose of obtaining a background check is to determine if the candidate or employee is suitable for the position. The check can be done either right before making an offer of employment, right after making an offer of employment conditioned on a satisfactory background check, or when considering an existing employee for another position.

Generally, a company can perform many of these checks using its own personnel. Such checks typically include verification of prior employment and/or educational credentials and telephone interviews with prior employers. In the event that a company chooses to hire an outside firm to conduct the background check, a company becomes obligated to comply with the Fair Credit Reporting Act (“FCRA”). The FCRA requires the company to provide an applicant or employee with prior notice that a background check is being conducted, to obtain the candidate’s written authorization to conduct the check, and to give follow-up written notice in the event that the employee is not hired based on some negative information revealed by the background check.

The type of background check needed will depend upon the requirements and nature of the job position. For instance, if a job involves driving, a check on the applicant’s driving record would be done. If the job involved handling money, a credit check may be in order.

There are two types of checks that require special attention: criminal background checks and credit history reports.

Criminal Records Check

Obtaining a criminal background check of a candidate for employment or of a current employee can help a company to determine if the candidate has a prior conviction record which might suggest that the individual is not suited for the position for which he or she is being considered. For example, a company would not want to hire a candidate with a history of multiple drunk driving violations if the job requires a substantial amount of driving, especially in company vehicles. In addition, there are several jobs for which New Hampshire law requires an employer to conduct a criminal background check. This includes child day care providers, school employees and volunteers, residential care and home health care providers, and personal care service providers.

Obtaining criminal background checks also limit a company’s potential liability for “negligent hiring.” Negligent hiring is where an employer is held liable to a third party for money damages if the employer knew or should have known that the employee would be a threat to another person in the course of the employee’s employment. For instance, a school or nursing home might be held liable for injuries suffered by a student or patient if it hired an employee with a criminal history of preying on children or the elderly, and such employee hurt a student or patient. Generally, companies should consider running such checks on individuals filling jobs that require a high degree of trust or honesty, or jobs in which the employee will be directly supervising children, the aged or infirmed.

Companies should limit the criminal record check to convictions and any ongoing proceedings, as opposed to prior arrests. Under federal and state discrimination laws, basing an employment decision on an arrest record could be considered discriminatory.

If a company decides not to hire an applicant or to terminate a current employee because of information learned through a criminal or other type of background check, the company must always be sure to base its decisions not to hire an applicant or to terminate an employee on information which is related to the job position.

To obtain criminal conviction records directly, a company will need to request a report from the law enforcement agencies in the states in which the applicant lives or has lived. A company will also have to ask the applicant or employee where he or she lived and has lived and obtain the individual’s written consent on each relevant state’s law enforcement agency form. Since this may be a state-by-state process, a company will likely need to complete a similar form for each state in which the individual lived and send it to that law enforcement agency. Keep in mind, therefore, that if a company conducts its own criminal record investigations in this manner, the information will be limited to only those states in which the applicant has admitted he or she has lived. An applicant could purposefully omit information about a state in which he or she has been convicted of a crime. Criminal record background investigations done by outside companies or background investigation consultants tend to have access to national databases which may lead to a more complete history of the candidate, regardless of what he or she chooses to willingly divulge.

Credit History Reports

Credit history reports can be useful to determine if an employee is trustworthy with money and financial matters. Credit histories also can help determine if someone may be vulnerable to accepting bribes or other types of inappropriate payoffs. Credit history reports generally cannot be obtained by employers without the use of one of the three outside credit bureaus, generally referred to as a “credit reporting agencies” (Equifax, TransUnion, and Experian (formerly TRW)). If a company decides to run credit history reports on a candidate or employee, it will need to follow the Fair Credit Reporting Act (“FCRA”). including advance written notice that the background check will be done and the applicant’s or employee’s written consent to conduct the background check. If the check reveals information that disqualifies the individual from the job, or is otherwise unsatisfactory, a company more than likely will need to rescind the offer of employment, not make the offer, deny a transfer/promotion to an existing employee, or terminate the current employee’s employment.

Before taking an adverse employment action based on information revealed by a company’s own research or by a Consumer Report or Investigative Consumer Report, a company must give the applicant or employee a reasonable opportunity to explain, if applicable, any information the applicant or employee believes to be inaccurate. The company must also provide the contact information for the agency from which any negative report was received. Employers must be careful to comply with the disclosure and consent requirements of the FCRA because a failure to do so could result in penalties and monetary damages.

Although conducting background checks can cost a company some time and money at the outset, it may well save the company a bigger problem in the future and go a long way to better ensuring a safe and secure workplace.