Employee Background Screening, Part I

Background checks are widely used in hiring and promotion decisions. Job applicants and existing employees and volunteers may be asked to submit background checks. For certain positions, screening may actually be required by state or federal law. Current concerns regarding security and safety have significantly increased the number of employment background checks conducted. This article takes a look at why background checks are conducted, as well as privacy concerns around the issue.

Why do employers conduct background checks?

Employers may check their current and potential employees for a number of reasons. Here are a few of the most common reasons:

  • Avoid negligent hiring lawsuits – the threat of liability is concern enough for many employers.
  • Child abuse and child abduction reports have resulted in state laws requiring criminal background checks for anyone who works with children.
  • Terrorist acts of 9/11 have increased security and identity-verification strategies by employers.
  • Corporate scandals of 2002 have resulted in higher scrutiny for corporate executives, officers and directors.
  • Common reports of false or inflated information provided by job applicants.
  • Federal and state laws require background checks for certain jobs (e.g. anyone who works with children, the elderly, or the disabled). State and federal government jobs may also require a background check and investigation for a security clearance.
  • Increasing availability of personal data on computer databases.

Most employees and applicants are unconcerned with background investigations, however, it can be a worry that an investigator may uncover some information about someone’s personal history that may not be relevant to the job. There is also the possibility that background reports may be taken out of context, or contain incorrect information.

What does a background check include?

Background reports can be as simple as a verification of an applicant’s Social Security Number (SSN), or as complicated as a detailed account of the potential employee’s history and acquaintances. Employers have also been known to search social networking sites for applicants’ profiles.

Some information that might be included in a background check include:

  • Driving records
  • Vehicle registration
  • Credit records
  • Criminal records
  • SSNs
  • Education records
  • Court records
  • Workers’ compensation
  • Bankruptcy
  • Character references
  • Neighbor interviews
  • Medical records
  • Property ownership
  • State licensing records
  • Past employers
  • Incarceration records
  • Sex offender lists
  • Personal references

The federal Fair Credit Reporting Act (FCRA) sets national standards for employment screening. The Acr applies to background checks performed by outside companies, known as consumer reporting agencies (CRAs). The Act does not apply in situations where the employer conducts background checks in-house.

Under the FCRA, a background check is known as a “consumer report,” the same name given to a credit report, thus the same limits of disclosure apply. According to the FCRA, the following information cannot be reported:

  • Bankruptcies after 10 years
  • Civil suits, civil judgments and records of arrest, from date of entry, after seven years
  • Paid tax liens after seven years
  • Accounts placed for collection after seven years
  • Any other negative information (except criminal convictions) after seven years.

It’s important to note that the above reporting restrictions do not apply to jobs with an annual salary of $75,000 or more per year. Also, the FCRA does not prohibit an employer from asking questions in an employment application about things that should not be reported.

Credit Reports & the FCRA

Under the Fair Credit Reporting Act (FCRA), businesses must obtain an employee’s written consent before seeking an employee’s credit report. If an employer chooses not to hire or promote someone based on the information in the credit report, it is necessary to provide a copy of the report and let the applicant know of his/her right to challenge the report under the FCRA.

The main purposes of the FCRA are to protect consumers from identity theft and from harm caused by CRAs and the sources that provide data to those agencies. Under the FCRA, all employment background companies constitute CRAs and are obligated to comply with the FCRA, as it pertains to employment.

Employers must take the following steps to ensure compliance with the FCRA:

  1. Fully inform the applicant of the nature and scope of the check being done and the fact that the information will be used to make employment decisions. Note that this notice must be in a document separate to the job application. After receiving the disclosure, the applicant has to provide a written release prior to the commencement of the background check.
  2. In circumstances that employers would take “adverse action” (i.e. refusing employment or dismissing an applicant) based in whole or in part on a report provided by a CRA, employers must provide applicants/employees with a) Notification that a decision is pending based on the report, known as the Pre-Adverse Action Letter; b) A copy of the report and c) A copy of A Summary of Your Rights Under the Fair Credit Reporting Act.
  3. After the decision to take adverse action has been made, employers must provide the following to the applicant/employee: a) Notice that the adverse action was taken; b) The name, address and phone number of the CRA that compiled the report, along with notification that the CRA did not make the hiring decision and cannot provide the specific reasons why the adverse action was taken; c) Notice that the applicant has the right to obtain another copy of his/her report within 60 days, and that he/she further has the right to dispute any incomplete or inaccurate information furnished by the CRA.


Job applicants and existing employees and volunteers may be asked to submit background checks for a wide variety of reasons. This article takes a look at why background checks are conducted, the types of information that can and cannot be included in background checks and the regulations around employee/applicant background checks. The article explores how the Fair Credit Reporting Act (FCRA) determines what can and cannot be disclosed, as well as the procedures for employers conducting such checks.

CIPP Exam Preparation

In preparation for the Certified Information Privacy Professional/United States (CIPP/US) exam,  a privacy professional should be comfortable with topics related to this post, including:

  • Employee background screening (IV.B.a.)
  • Screening requirements under FCRA (IV.B.a.i.)

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