When hiring new employees, it's important to conduct a thorough and compliant background check.

As a business owner, you are responsible for protecting your company assets, ensuring the safety of your employees and the holding the reputation of your company. One way to do this is to run background checks as a standard part of your hiring process.

While it’s possible to perform an informal background check via online searches and social media, when a business needs to verify a job applicant’s background, there are laws that regulate the process.

Employment background checks are governed by the Fair Credit Reporting Act (FCRA), which is enforced by the Federal Trade Commission (FTC). There may also be laws in your state that regulate the screening process. Not following proper procedure can leave your company vulnerable to legal action and fines, which is why employers should use a full-service FCRA-compliant background check company to conduct their applicant screenings.

To help you understand how to screen for the right information in the right way, this guide will:

  1. Detail the reasons for running background screenings
  2. Outline the types of reports you can run
  3. Share steps to establish and document your process
  4. Provide a checklist for identifying the right employee screening vendor to meet your needs

Why conduct a background check?

You do not want a stranger to have unlimited access to your business, accounts, clients or assets. However, when you hire new employees, they typically gets a log-in for your computer systems and a key badge to enter the building. They quickly acquire information about the running of your company and access to your customers and their files.

Before granting outsiders access to all of this valuable information, a background check will allow you a certain level of confidence about your new employee.

When conducted according to regulations and using legitimate data sources, background screenings can:

  • Improve your chances of making wise hiring decisions
  • Uncover false claims made by an applicant
  • Identify potential concerns, such as a job termination, criminal conviction, bankruptcy, etc., that may need to be discussed with the applicant prior to extending a job offer
  • Protect your company assets
  • Improve workplace safety
  • Ensure regulatory compliance
  • Reduce the risk of negligent hiring claims

Before granting outsiders access to all of this valuable information, a background check will allow you a certain level of confidence about your new employee.

Types of background check reports

There are many reports that can be run as part of the background screening of a potential employee. Often, which screenings you choose to conduct will be dictated by the industry you’re in and the position for which you’re hiring.

For example, a financial services company may run a credit history report while a taxi service might be more interested in driving records.

Standard background screening reports likely include a combination of:

  • Social Security Number trace/validation
  • Address history
  • Employment history verification
  • County(ies) criminal history search
  • National criminal database search
  • Sex offender list search
  • OFAC global terrorist search
  • Federal criminal search
  • National alias search

There are also many additional reports that can be run, such as:

  • In-person county court record retrieval
  • Credit check
  • Driving record
  • Drug screening
  • Professional license verification
  • International searches
  • Reference interviews
  • Industry-specific reports

[For more specific information on what information appears in employee background checks, see our article: Employee Background Checks: What's Legal and What Do They Check?]

Implementing and documenting a background screening process

To ensure that your company treats all applicants equally, it’s wise to create a standardized process for conducting background screenings of potential employees.

To do this, refer to the FTC website to understand how to comply with the FCRA. Also, learn about state laws that regulate background checks for the state(s) in which your business operates. Become familiar with federal laws protecting against discrimination to ensure your process is the same for all job applicants and you properly respond to any negative information the screening may uncover (visit the U.S. Equal Employment Opportunity Commission website to learn more). Finally, educate yourself on negligent hiring claims so that you implement the right processes to avoid them.

In summary, your company’s process should:

  • Adhere to applicable regulation
  • Ensure consistent process for all applicants
  • Document how you will gather and store written permission for background screening
  • Indicate at what stage in the employment process you will conduct a screening
  • Identify the types of screenings that will be conducted (this may vary by job type/level)
  • Outline process for taking adverse action, if needed, based upon findings

Having a good sense of this process prior to choosing a screening company to work with can help you select the right vendor. However, you may also find it helpful to ask questions about process of the vendors you consider as they should have several of these steps, such as documentation and adverse action procedures already in place.

Why use a background check service?

Although you ultimately are the one responsible for ensuring adherence to all laws, a helpful way to facilitate compliance and increase accuracy of reporting is to use a full-service, FCRA-compliant background screening company. An added layer of confidence may be found in those companies that are part of an industry association that holds its members to a high standard and/or are accredited by, and have received a high rating from, the Better Business Bureau (BBB).

In addition to helping ensure compliance, using a full-service screening company can reduce the hassle of running background checks. While many reports are easily available online, gathering the necessary breadth of data and verifying the validity of the information can require some hands-on investigative work.

Particularly in verifying employment history and running criminal background checks, the use of online databases is limited due to the disparate and sometimes incomplete nature of electronic data. For example, to gather an accurate employment history, phone interviews or email communication with past employers may be needed. Understandably, this can be time consuming. What’s more, experienced interviewers should also know what questions can be asked and how to document a response.

Conducting thorough criminal background checks can be even more time-consuming and a bit confusing as there is no one database into which all U.S. counties report. Additionally, there is a separate database for federal criminal reports. In addition to running digital searches, a thorough criminal search may actually require visits to courthouses in the counties where a potential employee has resided and currently resides to check physical records. Many full-service background check companies offer this level of investigation. A screening company may use a local resource saving you the time and expense of traveling to each court house.

Selecting a background screening company

Once you understand your company’s needs, you can assess which vendor may be the right fit. Keep in mind several factors as you narrow your list:

  • Compliance: The first step in reviewing companies is to verify that they are FCRA compliant.
  • Services offered: In addition to online database searches, find out if the company provides any investigative type services such as employment verification, reference interviews and courthouse visits.
  • Cost: Costs vary widely with offerings ranging from $25 to $100+ per applicant screening. Many companies have three levels of pre-configured packages and some have a registration or sign-up fee. For the most part, your cost is based on the number and types of reports you need for each applicant plus the number of applicants you will screen each year. If you will run a large number of screenings each year, ask about quantity discounts. Also ask questions and seek clarity when you are given a list of potential reports. Nomenclature varies from one company to the next and sometimes multiple reports pull the same data. Ask if there are ways to avoid this duplication.
  • Industry specialization: Most background screening companies offer the same general reports, but some also provide industry-specific checks, such as financial, landlord, medical, household and transportation. If your business is in any one of these industries, consider working with a company with that specialty.
  • Customer support: Determine what your customer service needs will be. Are you comfortable with contacting a customer call center or do you prefer to speak to the same account manager each time? Customer service varies across companies; some offer phone support Monday through Friday while others have 24/7 email support. Some companies offer phone, email and online chat options; others assign you an account manager.
  • Business reputation: To protect your business, work with a vendor that is reputable. To assess their reputation, do an online search reviews from customers and business publications. The company website or an online search should also reveal if this company has any accreditations, such as from the BBB or an industry association like the National Association of Professional Background Screeners (NAPBS).
  • Reporting and functionality: Online portals can make the screening process easier for you and your job applicants. Many companies offer portals that integrate with existing HR platforms. However, you may want to access a human to review them with you. Determine what level of technology fits you and your business.

CO— does not review or recommend products or services. For more information on choosing the best background check services, visit our friends at business.com.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Published February 25, 2019