Background Checks

Photo by Derek Key – used pursuant to creative commons license

Some companies use background checks or credit reports as a way to screen new hires. It’s not illegal to use background checks, but it can lead to a couple of problems.

First, the use of credit checks is regulated the Fair Credit Reporting Act. This is the same law that gives consumers the right to dispute errors in their credit reports. It requires employers to get an employee’s permission before running a credit check. It also requires a stand-alone (i.e., not part of another form) notice to the applicant about what the report will be used for.

Second, the use of background checks, especially criminal background checks, can sometimes be deemed discriminatory against minorities because minorities are more likely to have criminal backgrounds. They must be used with care.

The EEOC and the FTC have a joint publication explaining both obligations  that is worth reviewing if you are an employer who uses background checks as part of the hiring process.

Unless there is a compelling need for it, I generally recommend that my clients skip the credit check, except for management-level employees. If a criminal background check is used, I encourage my clients to use it only after the applicants have been screened and selected for interviews, and to go ahead and interview candidates with criminal histories and give them an opportunity to address them. All situations are unique, however, and different approaches may be warranted in different industries.