Hiring is an expensive, time-consuming process, so employers want to make sure they get it right the first time. Background checks can represent a key tool in ensuring the people hired are trustworthy and have the skills, experience, and education they claim to possess. Delving into an applicant’s background can also help insulate organizations from lawsuits and charges of negligent hiring in case something goes wrong.

But a growing number of federal, state, and local laws have complicated the types of background checks employers can perform and how companies can use the information. Federal laws, such as the Fair Credit Reporting Act (FCRA), the Americans with Disabilities Act (ADA), and Title VII of the Civil Rights Act of 1964 (which prohibits discrimination), to name only a few, all come into play when an employer conducts background checks, and recent interpretation of these laws have made background checks more complicated.

So how can an organization comply with the law, maintain a safe work environment, and minimize legal liability? Employers need to understand the different types of background checks, determine which laws impact them and create proper policies, and train employees to abide by them.

Different Types of Background Checks

The Federal Trade Commission (FTC) considers employment background checks consumer reports that fall under the FCRA. Before getting any consumer report for current employees or job applicants, the FTC requires employers to take several steps, which includes disclosing the information may be used for hiring and other employment-related decisions.

Many companies rely on third-party vendors to conduct background checks. When using other companies, employers must certify that these companies are in compliance with federal law.

Best Practices

It’s important to review background check policies. Here are a few things to consider.

  • Stay current on laws, guidances, and court rulings. Federal, state, and local laws can impact the types of background checks employers can conduct. When companies have multiple locations in different jurisdictions, compliance becomes even more of a headache. It’s important to stay on top of new developments and involve in-house counsel, outside law firms, HR, and senior-level executives in the process of reviewing current policies and updating them where necessary.
  • Create specific documents. Employers must be sure they create clear, specific documents so that potential and current employees understand when a consumer report will be conducted and what it will entail. If you haven’t updated forms since the Consumer Financial Protection Bureau took over the enforcement of the FCRA, you need to do so immediately.
  • Update training manuals and educate. Supervisors and hiring managers need regular updates and refresher training to be sure they explain exactly what employees and potential employees are signing under the FCRA.
  • Consider the timing. Generally, it makes sense to conduct background checks after a conditional job offer has been extended. This cuts down on the number of checks. It also minimizes the chances that potential employees can claim discrimination based on information in the background check.
  • Customize checks to the job. Companies should consider whether the information a check provides is necessary for the position the employee will hold. For example, if a position involves driving a company vehicle, then it makes sense to review an applicant’s past driving record. Jobs with more responsibility and visibility should carry greater scrutiny.
  • Document everything. Hiring managers should keep written notes about every decision, including how information is used in hiring decisions. This can help in any investigations and lawsuits that may arise.
  • Employers who conduct smart, appropriate background checks can minimize turnover, while staying in compliance with the law and decreasing the chances of hiring-related lawsuits.

    Richard D. Alaniz is senior partner at Alaniz Schraeder Linker Farris Mayes, L.L.P., a national labor and employment firm based in Houston. Email Alaniz at ralaniz@alaniz-schraeder.com.