How to do an Employee Background Check: A Quick Guide

Employee background checks are a vital part of hiring. They help you make sure you’re bringing the right people into your organization while minimizing potential risks. However, the process can be complex, especially with varying state regulations. Here’s a quick guide that walks you through conducting effective background checks, the type of background checks you should consider and how to stay compliant with the law.

What is a Background Check?

A background check is an investigative process that uses public and private records to verify a person’s identity and validate information they’ve provided. The specific details uncovered depend on the purpose of the check. Employers use background checks to verify a job candidate’s history, qualifications, and relevant credentials.

These checks can include criminal records, credit reports, employment history and education verification, among others, depending on the role requirements. The goal of a background is to confirm that the individual you’re hiring is trustworthy, reliable and a good fit for the job.

Why You Should Conduct Background Checks

Background checks protect both your company and employees. By screening candidates for potential red flags, such as criminal activity or unsafe driving records, you can mitigate risks and avoid costly legal issues. Proper background checks help you hire trustworthy employees and reduce turnover on your team.

Failing to conduct these checks can leave you vulnerable to lawsuits, especially if an unvetted employee causes harm or violates company policies.

Challenges of Conducting Background Checks

While crucial for protecting your business, background checks present challenges employers must navigate. These include balancing legal requirements, maintaining fairness and tailoring the process to the specific needs of each role.

Varying State and Federal Laws

One of the biggest challenges employers face is the patchwork of state and federal regulations governing background checks. For instance, some states have adopted ‘ban the box’ laws, which prevent employers from asking about a candidate’s criminal history until after a conditional job offer is made. This becomes even more complicated for employers operating in multiple states who must remain compliant in all of them.

At the national level, employers must also comply with federal laws, such as the Fair Credit Reporting Act (FCRA), which set guidelines for conducting background checks, particularly regarding credit reports and criminal history.

Fairness vs. Risk Management

Balancing fairness with protecting your company from potential risks is another challenge. Take certain types of criminal conviction: they may disqualify a candidate for a job involving sensitive data or vulnerable populations but could be irrelevant for lower-risk positions. Similarly, while a credit check might be essential for a financial management role, it might be unnecessary for other positions.

Tailoring an employee background checks to each job helps avoid discrimination while still mitigating risks. Employers must decide which types of background checks are necessary for each role without overstepping.

Maintaining Consistency

Implementing a consistent background check process helps avoid legal pitfalls and provide equal opportunities for all candidates. However, applying consistency across multiple hires and job positions can be difficult, especially with varying legal requirements.

Address this by proactively developing clear policies that define when and how to use each type of background check.

Steps to Conduct an Effective Background Check

A thorough background check involves multiple steps, from selecting the right types of checks to verifying legal requirements and preserving compliance with federal and state laws.

Here’s a guide to the full process, outlining everything you need to do to create a background check system that’s fair, compliant and tailored to your company’s needs.

Step 1: Determine What Types of Background Checks You Need

Not all background checks are created equal. The type of checks you need depend on the role, level of responsibility and industry requirements. Common types and their uses include:

Criminal background checks are best for jobs that involve working with vulnerable populations, roles that require a high level of trust and industries concerned with public safety. They help prevent legal and reputational risks by identifying any history of violent behavior, theft, or other serious offenses.

Credit checks are most appropriate for financial positions, managerial roles, or any job that involves financial decision-making or budgetary authority. They help identify financial stability, which can be important for jobs that require managing budgets or handling money. However, they can be controversial especially in difficult economic times because poor credit does not necessarily correlate with job performance, or even an individual’s financial management skills. For this reason, some states restrict the use of credit checks.

Driving record checks are, as the name implies, ideal for jobs that involve driving — e.g., delivery or truck drivers. A clean driving record shows that a candidate is a safe and reliable driver, minimizing the risk of liability for the company.

Education verifications are best for roles that require specific qualifications, like a relevant degree or certification. A case study might involve a school conducting an education verification to confirm all teachers are trained and certified, and an accounting firm may verify that each candidate is a CPA.

Step 2: Understand Legal Requirements

Once you’ve determined the types of checks needed, it’s important to grasp the legal framework for conducting them. Each state sets different rules on what employers can ask and when.

Many states now require that employers postpone criminal background checks until after a job offer is made. This is commonly referred to as a ‘ban the box’ policy, which allows candidates with a record to be considered fairly based on their qualifications.

At the federal level, the Fair Credit Reporting Act (FCRA) regulates how employers can use background checks, specifically credit and criminal history reports. Under the FCRA, if you decide not to hire someone based on these results, you must provide the applicant with a copy of the report and give them an opportunity to dispute the findings.

Managing these requirements can be complex, particularly when staying compliant across multiple states while still treating your employees and candidates consistently. If your business operates in several states, consider creating a compliance guide for your HR team so they follow the specific laws in each location.

Step 3: Tailor the Check to the Job

A key part of the background check process is aligning the check with the responsibilities of the job. Tailoring background checks protects your business and promotes fairness toward candidates.

In a situation where you were hiring a delivery driver, you might need a driving record check and a criminal background check, because they directly relate to the job responsibilities, but you’re unlikely to need an education verification.

Conversely, when hiring a CPA, you may want to obtain a criminal background check, education verification and possibly a credit check. But you probably don’t need to worry about a driving record.

In general, it’s best to avoid performing unnecessary checks. As an illustration, if a role doesn’t involve driving, there’s no need to check the candidate’s driving history. This shows respect for your candidates’ privacy while also ensuring you use your resources appropriately.

Step 4: Conduct the Background Check

Now that you’ve tailored the background check to the job and reviewed legal requirements, you’re ready to perform it. Here’s how:

1. Choose a reliable provider: Background checks are often performed by a third-party service. Make sure the one you work with is professional, reputable and can conduct thorough, legally compliant checks.
2. Obtain written consent: Under the FCRA, you must notify the candidate and get their written permission before conducting a background check.
3. Review the results carefully: Once you receive the report, take time to review it in context. A minor traffic violation, for example, may not be relevant for an office-based role but could be disqualifying for a driving position.

While background checks are important, they don’t always tell the full story. If something concerning appears in a background check, give the candidate a chance to explain before making a final decision.

James Moore HR Solutions: Your Partners in HR Compliance

Laws and regulations surrounding background checks constantly change. To stay compliant, your HR department should regularly review state and federal laws. Additionally, keep an eye on emerging trends, such as restrictions on credit checks and evolving ‘ban the box’ regulations.

Conducting employee background checks is essential for protecting your business, hiring the right candidates and strengthening your HR function. By tailoring checks to each role, staying informed about legal requirements and seeking professional help when needed, you can create a compliant and effective background check process.

Need help with background check compliance? James Moore HR Solutions can assist you in navigating this complex process and creating clear, compliant policies for how your company uses background checks in the hiring process. Contact us today to get started!

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