woman interviewing a man
Background checks are becoming increasingly more common in many industries, and business owners must be aware of what they can and cannot inquire about. — Getty Images/pixelfit

As an employer, background checks are useful because they give you a better glimpse into who you’re hiring. In fact, the Society for Human Resources Management found that 92% of companies perform background checks on employees.

When you’re conducting background checks on employees, it can be difficult to know what information is fair game and what isn’t — and it doesn’t help that the laws vary depending on what state you do business in.

It also depends on your industry, the position you’re trying to fill, and whether you work in the public or private sector. And, regulations change often. Here are three things you need to know about background checks. [See our full background check guide.]

They are a legal requirement for certain jobs

For certain positions, employees are required to undergo background checks. For instance, anyone who works in the financial services industry, education, healthcare, or government are required to undergo background checks.

[For more on how to properly recruit candidates, see: Struggling to Hire? Good Recruiting Takes Creativity and Commitment]

Failing to comply with these requirements can result in significant fines for your business and can damage your company’s reputation. In January, Lyft paid $224,375 in civil fines to the Colorado Public Utilities Commission (PUC) for allowing a driver with previous felonies to transport passengers for over a year.

The Colorado PUC also hit Uber with an $8.9 million fine for allowing 57 individuals with criminal histories to drive for the company. And, in February 2019, Uber received a report from the Pennsylvania PUC which outlined ways the company could strengthen their process for performing background checks.

If you plan to perform background checks on your employees, you will need to stay up to date on changing requirements.

Legal compliance is becoming increasingly complex

If you plan to perform background checks on your employees, you will need to stay up to date on changing requirements, including:

  • Criminal history inquiries. Increasingly, lawmakers are passing Ban the Box legislation which limits the ability of an employer to inquire about criminal history.
  • Salary history inquiries. Many cities are also passing salary bans, which prevent employers from using previous salary information to determine compensation. This applies even if the applicant discloses their previous salary themselves.
  • Consumer information. There are also regulations employers will have to follow to comply with theFair Credit Reporting Act. This is no easy feat since many of these differences are subtle and change on a yearly basis.

Background checks on freelancers are becoming more common

One of the biggest changes to the job landscape is that increasingly, companies are relying on freelancers instead of full-time employees. It’s anticipated that by 2020, more than 40% of the workforce will be made up of freelancers.

Most companies hire freelancers because they are hoping to save time and money, but running a background check cuts down on both. As the definition of work continues to change, though, more companies will begin requiring background checks on freelancers.

After all, your company still faces a certain level of liability every time you hire a freelance contractor. You could be sharing sensitive company information with this person, so you want to know they’re trustworthy and reliable.

You can expect to see background checks on freelancers becoming increasingly common. A HireRight study showed that the number of companies conducting background checks on freelancers and temp workers has already risen 43% since 2012.

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.

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