Checking Up

Published On: May 30, 2017By Categories: Business Management, Features, Workforce Development

You may need to use a pre-employment background check, but be careful to do so correctly.

By William Lynott

It’s unfortunate to admit, but every new employee brings a possible threat to your business these days.

Among them are theft, sexual harassment, physical violence, identity theft, fraud, and drug use. The potential for ruinous legal actions is clearly higher today than ever before. That’s why a background check before hiring an applicant can save your business.

However, it’s essential background checks be conducted within the maze of laws designed primarily to protect job applicants. Here are some things you need to know before deciding to use them.

“The use of background checks is governed by a multitude of federal, state, and even local laws and regulations,” says labor law attorney David Roth of Fisher Phillips in Denver Colorado.

“For example, the Fair Credit Reporting Act requires advance notice to the applicant that a background check will be made, and the applicant must provide written consent for the procedure. Further, it requires that the employer provide a copy of the report to the applicant before and after taking any adverse action.”

The Fair Credit Reporting Act along with other laws and regulations makes it advisable you consult with an attorney experienced in labor law before adopting a policy of making pre-employment background checks.

“Some laws actually require employers to conduct background checks,” Roth says. “For instance, background checks are usually required for applicants who will be working with children, the elderly, or the disabled.”

Despite the need of adherence to applicable laws, many employers feel the positive benefits of background checks far outweigh the inconveniences. Let’s take a look at both the pros and cons.

Benefits of Background Checks

“A comprehensive background check including criminal convictions, civil filings, credit history (where permissible), and social media will reduce the number of people hired with a history of violent, anti-social, or otherwise undesirable behavior,” says labor attorney Todd Wulffson, a managing partner at Carothers, DiSante & Freudenberger LLP in Irvine, California. “This will likely reduce the risk of hiring persons who may harm the company, its employees, or customers.”

Wulffson also points out a comprehensive background check reduces the risk of “negligent hiring” cases against the employer by ruling out applicants who, if they commit any bad act in the workplace, provide an easy argument they should never have been hired because of their history.

“Another benefit,” Wulffson says, “is eliminating applicants through various types of background checks reduces the pool of applicants, thus simplifying the interviewing process.”

There are several benefits of pre-employment background checks:

  • Such checks increase an employer’s ability to ensure quality employees.
  • A clean background check may indicate an applicant is trustworthy, reliable, and responsible.
  • A clean background check may help predict job performance.
  • Pre-employment background checks often discourage applications by individuals who are trying to hide something.
  • They may increase an employer’s ability to provide a safe workplace and decrease instances of workplace violence.
  • Background checks can increase an employer’s ability to minimize theft losses as a result of employee dishonesty.
  • They may increase an employer’s ability to avoid negative publicity should an employee’s actions or history become public.

Disadvantages of Background Checks

The cost for conducting background checks has dropped sharply in recent years. The cost for a limited background check in a single state can be as low as $25. Still, cost must always be factored into the process.

“Background checks can be expensive,” Wulffson says. “Either because one has to retain a company to do the searches, or because employee hours are directed to background checks instead of more productive company business.”

More Information
The digital age has made it easier than ever to conduct pre-employment background checks. There are hundreds of online companies available to conduct searches from the most basic up to the highest level including criminal backgrounds.

For more information on how to conduct a background, check

Another factor to consider is the potential the information in the background check report is incorrect, which could improperly disqualify a good candidate or, conversely, permit the hiring of an undesirable candidate.

Other points when deciding to use background checks:

  • They can’t always indicate whether an individual with a problematic past has since reformed and become qualified for the job.
  • There is the potential of negatively affecting the morale of employees because they may feel a policy of conducting background checks is an invasion of privacy.

“Also,” Wulffson says, “if a company does comprehensive background checks, particularly if it does them early in the application process, it can develop a reputation as a company that invades the privacy of its applicants and employees, and is therefore an undesirable place to work. This poor reputation can prevent otherwise strong candidates from applying.”

This is definitely something to keep in mind when hiring young people. The “culture of the company” is very important to members of Generation Y.

Keep in mind, too, an improperly conducted check could potentially violate federal, state, or local laws—and monetary penalties for noncompliance with those laws can be significant. These laws and regulations may be complex and difficult to follow, and may require the assistance of legal counsel.

For example, say the background check process eliminates a great deal of applicants, most of whom are of the same race. In that case, the federal Equal Employment Opportunity Commission, a state agency, or an enterprising plaintiff’s attorney may claim the company used the background check as a means to discriminate in the hiring process.

“If the company does a background check before legally compliant notice and consent has occurred, and someone other than the employer does the check, the company may have violated federal law,” Wulffson says. “The Fair Credit Reporting Act, or state equivalents which carry penalties on their own, may be used as the basis for an invasion of privacy or failure to hire case.”

Remember, too, background check information, especially if taken from social media sites, may not always paint an accurate picture of an individual, and decisions based on social media may be more susceptible to claims of discrimination.

“Keep in mind,” Wulffson adds, “the employer does not need the applicant’s consent to review publicly available information about the applicant, which can include criminal records, civil filings, and social media sites.

“However, if the employer does not apply the same level of scrutiny to all applicants, or learns personal information about the applicant that cannot be used to make a hiring decision (religious affiliation, sexual orientation, cultural or national origin identity, marital status, disability status) the company risks a lawsuit for invasion of privacy or discrimination if the applicant is not hired.”

A Parting Word of Advice

Obviously, there is risk and expense involved in the use of pre-employment background checks. Still, increasing numbers of small business owners are looking to them as a first line of defense against the potential problems introduced each time a new employee is hired.

I asked Wulffson to summarize his thoughts for a groundwater system professional considering the use of a background check for his or her next hire.

“Our advice for an overall best practice is the benefits of a standard background check—a criminal records check and verifying employment/references—outweighs the burdens,” he says. “Checking these two areas is not expensive, and the risk to the employer for not doing such a minimal and reasonable check is simply too high.”

Still, careful analysis of the cost versus the benefits is always a wise move.

“Credit checks should only be done where legally permissible and relevant to the position,” Wullfson adds. “Civil records checks, such as finding cases where the applicant was a plaintiff or a defendant in a past lawsuit, should only be performed for executives or other high profile positions.”

It’s important to keep in mind applicants must be told upfront what background checks are to be done, the checks must be done only after an employment offer has been made, but before employment begins. According to Wullfson, this provides a system that is legally compliant, as fair as possible to the applicants, and protective of the employer’s interests.


William Lynott is a management consultant, author, and lecturer who writes on business and financial topics for a number of publications. He wrote the Your Money column for Water Well Journal from 2001 to 2016. His book, Money: How to Make the Most of What You’ve Got, is available through any bookstore. You can reach him at or through his website:

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