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Background Checks are Critical – But Are You Performing Them Legally?

FieldPulse | September 16, 2016

Background Checks

We all want reliable employees. We want people who show up on time, who know how to do their jobs, who enjoy the work they do, and who keep our customers happy. For service businesses, field workers are often unsupervised and interacting with customers. Every time your team member steps into a customer’s home can be a huge liability against your company. But finding good employees is hard, and, since an interview can only tell you so much, most businesses rely on background checks to vet potential employees.

But for small business owners, knowing what kind of background check to make, what 3rd party businesses to work with, and what information to consider is hard. What kind of a background is inappropriate for your line of work? What kind of background check will tell you everything you need to know? How much should it cost?

There are a ton of regulations and services for background checks, and how they work can vary depending on what state you’re in. This guide will break down the basics, and help you figure out what you’ll need in order to thoroughly (and legally) vet potential employees.

There’s More Than One Kind of Background Check

Background checks can be divided into two categories: criminal and credit. Credit checks are primarily used in industries where the potential employee might be handling large sums of money or might be vulnerable to bribery, but they’re also used as a general measure of responsibility and behavior (although some believe that’s a bad practice). Credit checks for employment are illegal in some states, it’s limited by strict reporting and privacy standards by the federal government.

Criminal background checks are the most common kind, as they’re applicable to pretty much every industry. They can be performed at the county, state, and federal levels, but the quality of the information that you receive varies from place to place. 3rd party “full service” companies are commonly used for criminal background checks, as they have pre-existing relationships with the relevant authorities and they are Fair Credit Reporting Act compliant (where credit checks are legal).

In addition to criminal and credit information, some background check services verify education history, birth records, and visa status, and manually verify employment history, references, and other information. There’s a nigh-endless number of government and private databases that collect information on American citizens, and many of them are accessible if you’re willing to invest the time or money to do so.

Outside of 3rd party services, many small businesses run their own background checks by contacting these directories directly. The only problem? It’s typically illegal. There are strict guidelines concerning privacy and data collection, and it’s illegal to request certain kinds of information in certain states. Small business owners may see it as way to save money (and reduce your turnover expenses), but it’s a process fraught with headaches and complications.

The same applies to ‘DIY’ background check site that searches online databases and displays the results for your own interpretation. Even though the information is publicly available, using it to make hiring decisions can be illegal.

How To Legally Perform A Background Check

Even when you work with a 3rd party service, there are still parts of the process that you’re responsible for. If you screw them up, or forget a few crucial parts, you may be legally liable. If you want to go all-in and perform a federal check (which involves submitting fingerprints to the FBI), you can work with FBI-approved service providers.

No matter who you work with, though, here are the basics.

Get Consent

Make sure to get the full written consent of a potential employee before performing a background check. The 3rd party you’re working with should require it, and the federal government definitely does. Failing to do so will put you in hot water.

You should also provide the potential employee with information concerning their rights and responsibilities, and a description of the kinds of checks you’re going to perform.

Supply Reports

If you decide to not hire someone due to the results of a background check, you’re legally obligated to notify them and give them a written report on why they were turned down. That report should contain the specific records that influenced that decision and the contact information of organization or tool used to retrieve that information. Depending on where you’re located, you might need to supply additional information if you rejected a candidate due to their criminal history.

Allow Rebuttals

Not all records are accurate, and if you turn someone down because of a background check, you also need to allow them to formally respond. If the record isn’t valid, and they can prove it, it’s important to let them do so.

Perform Checks Equally

If you only do background checks when something ‘feels off’ about someone, chances are you’re violating Equal Employment Opportunity Commission (EEOC) mandates. Check everyone’s background once they reach the appropriate point in your hiring practice. Failing to do so can result in serious legal trouble.

Retain (and Destroy) The Records

In most cases, personnel records should be retained for a full year, or until discrimination charges are resolved. Make sure you include background information in your personnel records, as they will help you demonstrate your (hopefully legal) hiring process.

And when you do dispose of your records, make sure you do it properly.

When in Doubt, Talk To A Professional

The things we’ve covered here should help you get started with your hiring practices, but you should talk to a lawyer (or at least an HR professional) before making any changes. Background checks are subjected to innumerable laws and regulations, and the exact process is different in every state. What’s provided here is general advice that’s not specific to any one law, and you really should double-check before you make any decisions.

The EEOC provides an overview of how the relevant laws work at the federal level, and your state should provide similar information on their website. There are tons of guides available on choosing specific 3rd party services that weigh the pro’s and con’s of each, although many of them are sponsored by the companies in question, and there are similar breakdowns on what checks are or aren’t legal (spoilers: you can’t use a lie detector).

Background checks are a core part of the hiring process, which means it’s important to do them properly. Use a legitimate background check service, communicate openly with your potential hire, and keep all of your cards on the table. Doing background checks “the wrong way” might be cheaper, but it’s also illegal. By investing in your hiring process, you’ll be able to attract better employees all around.

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