Small Business Background Checks + Free Background Check Policy

An employment background check is a process an organization uses to verify that a person is who they claim to be. In order to avoid any misunderstanding, it is important to implement a background check policy that your company will use to outline when it is appropriate to conduct a background check and how to determine which items should be checked.

Background Check Policy Sample

Who Uses Background Checks to Hire?

There is a wide array of organizations that utilize background checks as an important part of the hiring process. Whether or not employers decide to use a third-party screening company to perform a background check often is determined by the size of the organization, the nature of the business, and the types of employees working at the organization.

For instance, while one employer might decide to complete basic criminal background checks on every employee, they might decide to specifically request driving history for their employees that will be driving a company-issued vehicle. Similarly, if the organization in question is a CPA firm, then they may request credit history from each of their new employees who would be dealing with financial business.

Some employers may request basic criminal background checks for the majority of their employees but may delve deeper for employees joining their executive team.

The key to establishing an effective process is understanding your industry-specific regulations and being consistent—even when applying role-specific background checks standards.

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When Do Employers Run Background Checks?

Employers have the option to conduct a background check both during the pre-hire stage (only to final candidates) and post-hire. Best practices suggest, however, that a conditional offer should be made before the screening process begins.

If a candidate is converting from being a temporary employee or contractor to a permanent employee, best practices would dictate conducting a background check before being hired in permanent capacity—even if that individual has been affiliated with the organization for some time. Be sure to apply consistent standards across the board, however, so that all candidates who are undergoing background checks are subject to the same process at the same point in their candidate journey.

Fair Credit Reporting Act Pre vs Post-Hire

Whether screening a candidate before hiring or post-hire, the Fair Credit Reporting Act, or FCRA (15 U.S.C. §1681), requires that employers must get a candidate or employee’s written consent before hiring a third-party agency to provide a consumer report. Note that this doesn’t just cover information you receive on the applicant’s credit but also criminal records, details received from character reference checks, work history, etc. To protect your business from lawsuits, be sure to disclose what information you take into account when making hiring decisions.

If the information uncovered throughout the screening process leads to a decision to not hire or promote an individual, the company must provide a copy of the report and let the applicant know of their right to challenge the report under the FCRA. Some states, like California, have more rigid rules limiting the use of consumer reports to make employment decisions, including checking an applicant’s credit history in most circumstances. You’ll want to be sure to verify any state-specific regulations, but many third-party screeners will have this step as part of their routine practice.

Why Employers Run Background Checks

Companies have a responsibility and obligation to protect their employees, customers, and reputation. One of the most effective ways to do this is to conduct proper due diligence when considering converting an applicant into a permanent employee. If the best indicator of future behavior is past behavior, then important considerations in conducting proper due diligence include researching both past activities and employment details divulged by the applicant, in order to confirm their legitimacy.

It’s fair to say that some people will give false or incomplete information on employment applications, so it’s generally a good practice to perform verification before making a job offer. Still, this does not imply that employers have untethered access when it comes to making inquiries into the personal dealings of a candidate’s life.

Be sure to ask permission (via a written consent form) and only delve into areas that are pertinent to the position being offered. After all, not only is superfluous information irrelevant to the search, but it can also become very pricey, as each additional inquiry usually incurs a separate fee. In the spirit of transparency, it also could be beneficial to add a note to your posted job description indicating that candidates will be subject to a background check. This note is not a substitute for a clear consent form that will need to be signed by the applicant before actually conducting the check.

Types of Background Checks

There are several different types of background checks, with each one serving a different purpose. Often, background checks can be customized, depending on the role and the policy of the organization. For instance, an overarching criminal background check can also be combined with a driving history, credit history inquiry, and drug test results. Be mindful that each additional inquiry incurs cost, and that you’ll want to only request information pertinent to the position and within the guidelines of state regulations where the employee is based—which becomes a bit more complex when there is a distributed workforce.

Although this list is by no means exhaustive, here are some common background checks that a company might request:

Criminal records

A candidate’s criminal record can include any convictions (both felony and misdemeanor), unless they’ve been expunged–and even still, some organizations may be able to command access of expunged records, depending on security clearance required for the position. Pending criminal cases are also likely to show, although the candidate hasn’t officially been found guilty.

Remember to check your state laws regarding the use of criminal records in making hiring decisions. Some states have passed legislation to give applicants with a criminal history a fairer shot at getting hired; the goal is to require employers to evaluate candidates on their experience, education, and overall fit for the position before considering their background.

Credit report

Credit reports, which detail history of borrowing and paying back money, can shed some light on how an employee may perform. Information that companies are looking to glean from a credit report can include a history of handling money, decision-making ability, and potential for criminal activity. Employers will not be able to see credit scores, however. Again, several states prohibit the use of credit checks as a prerequisite to employment in most circumstances, so know the guidelines in the states in which you are practicing.

Drug Testing

A pre-employment drug test is a test employers use to determine whether job candidates are using or have used illegal substances; results can confirm their job offer or lead to the employer rescinding the job offer.

Existing employees may also undergo random drug tests to ensure they are still complying with the drug-free requirements of the company; sometimes, employees are tested after exhibiting suspicious behavior or being involved in a workplace accident. In these cases, their employment may or may not be terminated, depending on the company’s policy and tolerance on addiction and drug use.

Verification Reports (e.g., Previous employment and Education)

Employers may verify employment and/or education history as part of the background check process to confirm work experience that the applicant has conveyed and to be sure that the applicant has any education required for the position.

Driving History Report

A report on a candidate’s driving history can include information on any traffic violations they’ve made, like speeding, reckless driving, or driving without a license. Suspensions and any current driving restrictions should also show.

Driving history reports are highly recommended and most common for all employees or job candidates who will be driving vehicles or operating equipment as a condition of their employment.

Reference checks

A bit less intrusive than the above-referenced (no pun intended) checks, a reference check is when an employer contacts a candidate’s previous employers, peers, and other sources to learn more about their on-the-job performance, employment history, and qualifications for a job. The contacted parties are generally provided by the prospective employee and reference checks can be conducted via email or telephone through a series of questions about experience with the candidate.

Most Important Attributes of a Background Check Policy Template

While advantageous, the utilization of background checks must strongly tie to an internal policy to ensure consistency and compliance. Be sure to account for the following items before rolling out your background check policy:

Enterprise-Wide Application

Regardless of your company size, if you’re going to implement background checks for some, then you must conduct them for all. Remember, you can select which types of checks are important to specific roles, but you must roll out the same checks for the same roles, and you must conduct checks at the same point in the hiring process for each candidate.

Ensure your background check policy states that all candidates will be screened and when (usually after a job offer is made). Also, be sure it’s clear that you will use the information found in the background check to finalize your hiring decision. If you’re planning to perform background checks throughout their employment with you, you should also state that within the policy, and ensure employees understand they can be terminated if anything changes their eligibility to work for your company.

Consistency Throughout

Since we’re referencing the EEOC’s recommendations to ensure consistency, it’s a good time to reiterate the importance of having a uniform background check policy. Establish firm guidelines for the type of screenings that the company will conduct for varying employee levels and roles and keep the process consistent across every candidate within those roles.

Inconsistent background check practices can lead to lawsuits concerning discrimination and negligence. Further, employers should decide how to adjudicate unfavorable results of information obtained from the background check process and that adjudication process should be applied to every candidate with the same results.

Compliant With Laws

As previously mentioned, there are many federal, regional, and state-specific regulations that need to be adhered to when considering what type of information is requested during a background check and how that information is used to determine employment viability. For example, regulations in San Francisco may differ than laws in Los Angeles or the broader State of California.

Familiarize yourself with the law within the region where you are hiring. Further, stay in compliance with the FCRA by obtaining explicit written consent to conduct a background check on any prospective employees.

Bottom Line

Background checks can be a vital part of the due diligence process conducted by employers in getting to know potential employees better and protecting the company and its reputation. In order to protect the candidate, however, there are guidelines, laws, and policies that should be closely adhered to. Creating a consistent and compliant policy that is enforced across the organization will prevent possible legal concerns while setting the foundation for a safe environment for all.