More than one-third of new hires fail within 18 months of being hired.
Background checks are an important part of the hiring process. When an employer posts a job opening, of course the goal is to attract applicants best suited for the position and, perhaps, for development, retention and promotion in years to come. Background checks are an important method of screening applicants for suitability for a position. They vary in form and execution, but typically involve exploring an applicant’s past employment, credit history, or other personal information. An employer can use this information to determine whether a particular applicant likely will be a good fit with the company’s culture, is the best candidate for the job, and most importantly, whether they have any past experiences that make them a risk to the business, its employees or customers.
Depending on the information sought, employers may use in-house staff or consult a third-party to conduct background checks. The Fair Credit Reporting Act (FCRA) is a federal law that establishes rules for employers using a third party to conduct background checks; that third-party is considered a consumer reporting agency (CRA). When an employer uses a CRA to run a background check on a job applicant – and existing employees, too – the employer must follow the procedures mandated by the FCRA. Those procedures include conducting background checks only for applicant to whom a conditional job offer has been made, notifying the person in writing using the appropriate forms that a background check will be done, and obtaining written consent from the applicant. The employer must then certify to the CRA that they in fact have complied with the FCRA and meet any additional requirements for an investigative consumer report.
The FCRA does not apply to background checks conducted internally by an employer’s in-house staff. However, in-house staff must comply with state law. Minnesota Statute § 13C.02 requires the employer to disclose in writing that a background check may be conducted, and the applicant may receive additional information about the check after it is completed and a copy of the report. Employers should be careful to ensure that all mandated processes are followed to the letter, especially when rescinding a conditional job offer. Running an unlawful background check exposes the company to legal, financial and reputational risks.
We often get calls from clients in HR departments who are stunned at what comes back on some of these background checks. These are applicants who otherwise have successfully navigated the interview process and received conditional job offers. Theft, embezzlement, narcotics, domestic abuse, sexual assault, revoked drivers licenses for outside sales positions, the list goes on. You name it and we have seen it. We also have seen the tragedies that can occur when background checks are not conducted – like this $7 million wrongful death lawsuit.
Lessons Learned: Despite and expenses and procedural hoops, background checks have increasingly become a necessary part of the onboarding process.
Bill Egan is a seasoned Employment Law Attorney backed by over 33 years of proven, veteran experience. He specializes in navigating businesses through conflict resolution in the workplace.
Emilee Walters is our first Avisen Legal Fellow alum and a third-year law student at St. Thomas School of Law. Emilee is an Avisen Fellow exploring a legal career in business law.