Employment Background Checks

Many employers perform background checks on prospective employees prior to making hiring decisions. Background checks may be worthwhile investments for a variety of reasons, and in some cases an extensive background check is required by law. A vast body of law has developed to protect the privacy rights of prospective employees, who may find information about their consumer history, financial condition, criminal background, and medical and health issues under scrutiny.

Reasons for Employee Background Checks

Employers may check job applicants’ criminal and financial history and drug use as a form of due diligence, in order to avoid possible future civil liability. If an employee commits a crime or causes an injury while on the job, and the likelihood of such conduct is something the employer should have discovered in a background check, the employer could face a civil lawsuit for negligent hiring or negligent retention.

Statutes regulating corporate governance tend to encourage employee background checks, even if they do not expressly require them. Under § 404 of the Sarbanes-Oxley Act of 2002, for example, a publicly traded company must prepare an “internal control assessment” of its financial reporting compliance. Certain employees’ backgrounds could be considered risk factors if the company gets into trouble.

Background checks are expressly required for certain types of jobs. The National Child Protection Act of 1993 requires criminal background checks for jobs involving child or elder care.

Background Screening Companies

Some businesses conduct background checks for other employers. Since background checks often involve checking job applicants’ credit histories, these businesses are subject to federal credit reporting laws like the Fair Credit Reporting Act (FCRA). Even if a background check business does not consider itself a credit reporting agency (CRA) under the FCRA’s jurisdiction, it fits the legal definition of a CRA if it reviews and assembles consumer credit information for a third party.

Credit Reports

An employer may review a job applicant’s credit history, but the FCRA requires it to obtain the applicant’s written consent. If the employer decides not to hire the applicant based on information in the credit report, it is legally obligated to provide the applicant with a copy and advise him or her of the right to dispute information in the report. The Federal Trade Commission’s Disposal Rule prescribes specific procedures for disposing of credit information.

Criminal Records

Employers are generally allowed to consider an applicant’s criminal history in most jurisdictions. A campaign known as “Ban the Box” promotes laws that prohibit employers from asking about criminal history in the initial stages of the job application process. This does not apply to jobs where a criminal background check is required by another statute.

More than 10 states have enacted Ban the Box laws. Minnesota has prohibited criminal background checks in the early stages of job applications for public employers since 2009. The law expanded to include private employers in 2014. Cities and counties in nearly 20 more states have enacted similar laws.

Drug Testing

Drug testing of job applicants is not required except in limited circumstances, such as state workers’ compensation programs that offer discounts to “drug-free workplaces.” Qualifying employers in Wyoming,, for example, receive a five percent discount, while Georgia offers a 7.5 percent discount.

Public employers who test applicants and employees must follow federal guidelines, and private employers are encouraged to do so as well. Employers must take care that their drug testing practices do not violate state and federal laws prohibiting discrimination based on disability, race, and other factors.

Social Media

Job applicants’ social media profiles and histories are a relatively new feature in employment background checks. Employers may simply use search engines and social media sites to research candidates, and some firms offer in-depth analyses of candidates’ online history. Employers run the risk of violating anti-discrimination laws if they engage in certain conduct, however, such as if they discover that a candidate is pregnant from her Facebook page and take that into account in their hiring decision.

Public Records

A considerable amount of information about job applicants is public record, and therefore it is available to employers and anyone else. Records of bankruptcy filings, for example, are public, but federal law prohibits discrimination against an applicant based on a past or current bankruptcy filing.

Workers’ compensation appeals are also public record. Employers may base a hiring decision on a prior workers’ compensation case if the injury would affect the applicant’s ability to do the job.

Medical and Education Records

School records are generally protected from disclosure by the Family Educational Rights and Privacy Act.

Medical records may be subject to disclosure with the job applicant’s permission, subject to the privacy restrictions of the Health Insurance Portability and Accountability Act (HIPAA). Employers must be very careful, however, in how they use any information obtained from medical records. Federal statutes like the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act prohibit discrimination based on a wide range of conditions.

Polygraph Tests

Private employers are generally prohibited by the Employee Polygraph Protection Act from requiring job applicants to submit to polygraph, or “lie detector,” testing during the application process. Exceptions apply to certain jobs in security, such as armored car drivers, and the pharmaceutical industry.