Hiring: The Rules of Conducting Background Checks

448218 microscopeUpdated on June 24, 2013

More and more employers are finding that background checks are a necessary hiring tool. In fact, about 70 percent of organizations conduct background checks on job candidates, according to the Society for Human Resource Management (SHRM).

Employers often seek background information on potential hires through a variety of means, including court records, criminal records, driving records and motor vehicle registrations, sex offender lists, Social Security numbers, and fingerprinting. Through a background check, employers can search for information related to credentials, past employers, personal references, and state licensing.

However, as you might guess, employers must carefully follow rules governing these items. As I explained in my previous post, Are Background Checks Really Necessary? employers must follow state and federal laws. All criminal background checks must comply with the Fair Credit Reporting Act, and candidates must sign a release form before a background check can be conducted.

Here are some other rules employers must follow, according to the Small Business Administration:

Lie detector tests. The Employee Polygraph Protection Act prevents most private employers from using lie detectors in the course of employment or in the hiring process. However, there are a few exceptions, such as armored car services and pharmaceutical businesses.

School records. The Family Educational Rights and Privacy Act and other state laws protect the confidentiality of school records, such as transcripts, and won’t be released without consent.

Medical records. Employers cannot request a job applicant’s medical records, and some state laws protect the confidentiality of medical records. The Americans with Disabilities Act allows employers to only inquire about an applicant’s ability to perform the duties of the job. If the employee can perform the work (with or without reasonable accommodations) employers cannot make job decisions (hiring, promotions, etc.) based on the disability. For more information, read “Adding Disabled Employees to Your Payroll.”

Bankruptcies. While bankruptcies are part of public record and may show up on a candidate’s credit report, the Federal Bankruptcy Act prohibits employers from discriminating due to a bankruptcy filing.

Military records. The military may choose to disclose limited information without the candidate’s consent, including name, rank, salary, duty assignments or status, and awards. Consent is likely to be required for other types of information.

Worker’s Compensation records. Because worker’s compensation appeals are part of the public record, employers may use this information in hiring decisions if they can show the injury may interfere with the candidate’s ability to perform the duties of the job.

The takeaway: While background checks can be a useful hiring tool, it’s important to learn the applicable federal and state laws and make sure your methods are in compliance. If you use a third-party for your background screenings, they should be able to advise you on what’s allowed and what’s not.

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