Conducting a proper and fair background check on potential employees is not easy, but it is an effective way to discover potential issues that could hurt your business.

Legal Considerations for Employee Background Checks

Do you conduct background checks on job applicants? Have you ever thought of doing so? If you answered ‘yes’ to either of these questions you need to be aware of the legal considerations.

There are a number of federal and state laws, along with local ordinances in some cities, which govern background checks. At the federal level there is the U.S. Equal Employment Opportunity Commission (EEOC) and Title VII of the Civil Rights Act of 1964, which states in part “…a person cannot be denied employment based on a criminal record alone…the decision to hire or not hire must be based on a business necessity…”

Some of the points to consider include, but are not limited to:

  • The nature and gravity of the offense or offenses
  • The time that has passed since the conviction and or completion of the sentence
  • The nature of the job held or sought

The EEOC has issued extensive guidelines for employers when considering the criminal history of a job applicant or employee and new guidelines were issued in April 2012. At the state level, 24 states have passed “Ban the Box” laws where your job application cannot ask if the applicant has ever had a criminal conviction. There are also 100 cities/counties that have passed a similar ordinance.

Another federal law that will apply is the Fair Credit Reporting Act (FCRA), which set national standards for employment screening done by an outside company called a “consumer reporting agency.” Under FCRA, a background check is called a “consumer report” — the same name given to your credit report — and the following cannot be reported:

  • Bankruptcies after 10 years
  • Civil suits, civil judgments and records of arrest, from date of entry, after seven years
  • Paid tax liens after seven years
  • Accounts placed for collection after seven years
  • Any other negative information (except criminal convictions) after seven years

Also, under FCRA you must obtain an applicant’s permission to obtain their credit report and this has been interpreted to include the driving history or Motor Vehicle Report (MVR).

Should You Conduct Employee Background Checks?

There are a number of legal considerations associated with conducting a proper and fair background check. It’s not easy, so why should you bother? The answer is in the EEOC guidelines; you do a background check when there is a business necessity. As a business owner, you have an obligation to provide a safe environment for your employees and customers as well as a fiduciary responsibility to the company.

Reasons for a background check include, but might not be limited to:

  • Employees driving a company-owned vehicle for deliveries or service work. Do they have a valid driver’s license and is their Motor Vehicle Record (MVR) reasonably clean?
  • If your truck fleet requires a Commercial Driver’s License (CDL), you are required to check the MVR and verify the license.
  • Sales and/or marketing employees driving a company car or being paid mileage for making sales calls. This could also apply to someone making deliveries with their own car, like pizza delivery. Do they have a valid driver’s license and a reasonably clean MVR?
  • Employees who are handling cash, checks, credit cards or making bank deposits. Also, employees who are allowed to place and receive orders, who have keys to your building or an alarm entry code, or can access sensitive company, employee or customer information like social security numbers and bank information. Do they have a criminal history for shoplifting, theft, burglary or receiving stolen property?
  • Employees who provide site security by checking ID’s at the door, actively monitoring customers inside or patrolling the grounds. Do they have an arrest record or conviction for assault, battery or weapons violations?

Who Can Help?

It is recommended that you not conduct background checks yourself. Hire a contract service like a consumer reporting agency and use care in finding someone reputable. Look for a company who has been in business for at least five years and is accredited through the National Association of Professional Background Screeners (NAPBS). Only 10% of consumer reporting agencies are NAPBS accredited! Expect the agency that you contract with to provide training in your obligations under FCRA and federal and state laws, along with a quick turnaround when a background check request is submitted.

Society Insurance policyholders receive discounted rates on Verisk’s employment screening products and services including motor vehicle reports and criminal background checks. Submit the online form at Verisk.com. Reference SOCIETY INSURANCE in the questions/comments box.

Lastly, if you are creating a new policy or procedure for doing background checks or updating an existing one, it should be done in consultation and partnership with your Human Resources professional as well as legal counsel.