Created August 20, 2008
Regardless of the size of your business, pre-employment screening is a highly recommended hiring practice, as it helps to prevent many of the costly pitfalls that are associated with employee hiring. Today’s hiring environment reveals the need for a more rigorous screening process than simply interviewing and checking references. Necessitated by the rise of security concerns, corporate scandals, and workplace violence, pre-employment screening is now an invaluable component for businesses of all sizes. Over 96% of HR professionals report that their companies do background checks of new hires, up from 66% in 1996 according to The Society for Human Resource Management Workplace Violence Survey. Investigating the background of a potential hire can help minimize your risk of liability for actions of a new employee; a risk of liability that increases exponentially when a background check was not performed. Before starting to perform these checks, or as a supplement to your existing hiring procedures, make sure that your business is aware of the legal considerations that impact this area.
A prevalent, and increasingly popular, solution for small businesses deciding to conduct pre-employment screening is to utilize the services of a background checking company. By hiring an outside company you can add efficiency and thoroughness to the process, as well as also gaining guidance on the legal requirements and federal and State regulations. Another perk to using an outside agency for screening is that under the Fair Credit Reporting Act (FCRA), your business can gain limited legal immunity in the areas of defamation, invasion of privacy, and negligence in the investigation.
Under the FCRA, your business must comply with specific requirements if you use an outside agency to perform background checks as part of your hiring procedures. The critical first step before having the check run is to ensure that the applicant or employee agrees to, and signs, a disclosure form granting authorization for the background check. After the screening, the applicant must be provided with a copy of their consumer report and a summary of their rights under the FCRA (also called a Consumer Summary). Before you are able to deny an applicant a position based on the findings in their consumer report you must also send them a 5-day letter. This letter provides the applicant with information for disputing any inaccuracies in their report and explains that they have five days to address those problems before your company takes any adverse action based on the report.
Given today’s hiring market, it is highly advisable to explore the benefits of incorporating background checks into your hiring process. Be sure to consult with a legal advisor to ensure your decisions are in compliance with the current employment law.
 15 U.S.C.A. § 1681h(e)