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Background Check for Employment – Types, Benefits & Regulations

What is a background check for employment?

When most people hear background check, they may think of it as a simple process for employment purposes. However, that is not necessarily the case. A background check confirms that an individual is who they say they are. Not only do employers confirm who the individuals are they also could be checking the person’s private and public records (for example, a criminal record, education records, and employment history).

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Types of background checks for employment?

There are multiple forms of background checks. The most common background checks are for Employment, tenant, Non-Profit, Government, Volunteers, Contingent Workers, or purchasing a firearm.  Background checks can involve, name-based county criminal search, e-verify, fingerprinting, database searches, professional license verification Office of Inspector General (OIG) reports, personal, criminal, universal, international, and credit reports. A background check for employment helps employers to know if there a possibility for liability or an unsafe work environment. Usually, a background check for employment occurs before a job placement is confirmed; however, many companies are requiring a background check before a promotion or change of position. At any rate, it can happen anytime during employment.

E-verify background check

An e-verify background check verifies a person’s identity and whether they have a legal right to work in the United States. E-verify verifies the I-9 form employers are required to maintain throughout a person’s employment.

Fingerprint background check

A fingerprint background check is handy when an employer has their potential employee get fingerprinted by an authorized organization. Mostly these are collected at a local, state, or federal law enforcement facility. However, there are also some private companies allowed to collect fingerprints. Usually, a fingerprint background check is done alongside other forms of background checks and is mandatory for certain government-run agencies, such as public schools, public service agencies, and airports.  Also, for a person to receive specific professional licenses, i.e., financial, banking, insurance, and specific medical licensing, they will need to have fingerprint background checks done.

Professional license background checks

These checks protect employers from hiring individuals who do not have the proper licenses they may claim they have. Professional license background checks also let the employer know whether or not their potential employee has restrictions or violations on their license. The US Department of Health and Human Services maintains the Office of Inspector General (OIG) background checks. The OIG background check allows for employers in health-care related fields to check whether, or not a potential employee is on the sanction list. The sanction list is a list of individuals and entities (LEIE) who have committed crimes in the health-care field.

Personal background check

A person can also run a personal background check on themselves. By having a personal background check done, an individual can see what employers see when they run a background check. They will also see if there are any mistakes in their background check. Also, by doing a personal background check, an individual can fix any errors that could hold them back.

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Criminal background check

A criminal background check is how employers check if their potential employee has a criminal past. The criminal background check looks for felony convictions, violent and sex crimes, fraud, and embezzlement convictions. After an employee’s criminal background check is authorized, the employee records run through:

  • National criminal databases
  • County criminal courts
  • Federal and state criminal records

Next, examinations in domestic and global terrorist watch groups, sex offender registries can be performed.

Universal background check

This background check occurs when a person is interested in buying a firearm from an authorized dealer. The potential buyers’ name runs through the National Instant Background Check System (NICS). Although the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) manages weapons being bought and sold, the Federal Bureau of Investigation (FBI) manages the NICS. An international background check occurs when a potential employee has lived, worked, or study abroad.

Credit background check

A credit background check (or Credit Report) sees individuals’ credits and debts. There are three main Credit Bureaus in the United States, Equifax Experian, and TransUnion.  Credit reports can typically run through one or all three of the credit bureaus. Usually, it is useful when a person is planning on getting a loan (such as auto, home), renting a house, and some jobs (such as in financial institutions).

Importance of getting an employment background check

It is vital for employers to perform employment background checks for multiple reasons. It is said that about 40% or more potential employees misrepresent themselves on their resumes, applications, and their previous criminal activities. One thing a background check does is point out discrepancies between what your applicants are telling employers and what is actually true. Companies lose about five percent of their revenue a year due to company fraud. Roughly 30% of employees admit to stealing from their place of employment, with about 41% of managers, 39% of employees, and 19% of executives or owners, have admitted to stealing. It is estimated that small businesses or organizations can lose around $140,000; while, larger companies or organizations can lose about $1 million a year, due to company fraud.

Financial losses

Not only can this lead to a loss of revenue, but employee productivity goes down, damages to a company’s public image, and employee morale can be devastating. Background checks are also an excellent way for businesses to reduce or eliminate violence in the workplace. According to a survey done by the US Department of Justice, an estimated 1.75 million days, a year are lost, along with roughly 55 million dollars in lost wages because of workplace violence. Workplace violence costs employers over a billion dollars a year. This includes both a loss in wages and a loss of productivity. In addition, legal fees and PR campaigns could require significant resources to salvage a damaged public image.

Avoid criminality at work

Using a background check for employment, organizations can see if a candidate has the potential to be violent or has ever been involved in criminal activity. Background checks also help a company avoid hiring liability. Depending on the nature of the job, it is the responsibility of the company to make safe hiring decisions and not hire people who could become a threat to other employees or the general public. An employee could become a liability if their behavior becomes errant. The errant behavior could also damage the companies’ public image and reputation. The bad behavior of employees could have astronomical effects on a company. It could potentially make an organization lose funding, customers, vendors, and in extreme cases shut them down completely.

Benefits of background screening

Background checks for employment also help to reduce the turnover rate. When a company, business, or organization runs background checks, they can determine who is a better match for them. Since background checks gather information from multiple sources, they can verify that the applicant is not misrepresenting themselves in any way.

The background checks help companies feel confident they are hiring qualified applicants. According to the Right Management Consultants Replacement survey, hiring someone who does not fit well in the company, can cost up to five times the position’s salary. These costs can occur due to the direct and indirect damages of recruiting, hiring, training, and wages and benefits. Some regulatory companies (such as insurance agencies) require background checks for employment in order to receive certain benefits.

What to do if there is a “HIT” on a background check?

The company must determine whether or not the information obtained disqualifies the applicant from the positions.  In criminal background checks, the EEOC recommends a company take into consideration:

  1. Nature of the crime committed
  2. The number of crimes committed
  3. The time between the crime and the potential employee’s application
  4. How relevant the offense is to the job the individual is applying for

If the employer takes all of these things into consideration and finds that the applicant is still not a good fit, then they must start the process of creating an adverse action. First, the company must send the applicant a pre-adverse action notice. The pre-adverse action notice informs the candidate that a background check has been run, and a hiring decision may or may not be made based on the results of the background check.  Accompanying this letter is a complete copy of the report. This gives the applicant the ability to dispute or reconcile any discrepancies on their background check.  If no dispute is made after a reasonable amount of time from when the pre-adverse action notice is sent, the company must then send them an adverse action notice (also known as withdrawal of offer notice), this informs the candidate with the final decision.

Rules and regulations while doing a background check for employment

When your company uses background checks for employment, there are many federal state and local rules and regulations to consider. One of the things employers must do is communicate with their potential employees that they intend to use information obtained from the background checks to make a hiring decision. This is done by giving the potential employee a standalone disclosure that states that the company is performing the background check. Some states require a state disclosure. The company must also provide an authorization form (consent form) to the applicant so that the applicant can agree to the background check for employment. If the company or organization does not provide this information to the applicant, they can face legal actions.

Fair Credit Reporting Act (FCRA)

FCRA is a federal law that is in place to govern how companies obtain background checks. Federal Trade Commission (FIC) and the Consumer Financial Protection Bureau (CFPB) oversee the FCRA. These governing bodies make sure that the background checks run fairly and accurately. They also make sure the applicant’s information is not misused, and their privacy is secure. Twenty-nine states, along with the District of Columbia (DC), do not add further restrictions to the ones enforced by the FCRA; some of these states are Alabama, Connecticut, Delaware, Idaho, Mississippi, Nebraska, Utah, Virginia, Wisconsin, and Wyoming.

Additional procedural laws for some states

Some states use other procedural laws, (additional wording on disclosures), which include California, Illinois, New York, Oklahoma, Georgia, and Minnesota. Some states allow arrest (NON-Conviction) records to be used in a hiring decision, (whether they were not guilty or charges dropped). Some states have banned the use of any non-conviction cases older than seven years. These states include New York, California, Michigan, Massachusetts, Alaska, Hawaii, Indiana, and Kentucky. The FCRA does not allow the use of any non-conviction charges older than seven years). Twelve states restrict reporting information on any case for older than seven years. These are California, Colorado, Kansas, Maryland, Massachusetts, Montana, Nevada, New Hampshire, New York, Texas, and Washington.

Massachusetts also has additional limitations on misdemeanor offenses. It is also important to note that some states and cities use “ban-the-box,” where companies are not allowed to ask about a criminal conviction on the application. They have to wait until the first interview to ask the potential employee. Several other states have legislation in the works to also “ban-the-box.”. Another important note about regulations when it comes to background checks for employment is that California and Nevada have restrictions when it comes to an individual on the sex offender registry. California also has limitations when it comes to an individual who was convicted of a marijuana conviction for more than two years prior. Georgia and Massachusetts, also have restrictions on particular “first offense” cases. Background checks in Kentucky never show pending cases.

Post background check employer duties

After the background check for employment has completed, a company or organization can decide if the individual will be a good fit for their company. If there is no discrepancy in the individual’s background check, they may decide to proceed with a hire. However, if there are the employer or potential employer must send a pre-adverse action notice followed by the adverse action notice. In 2012 the Equal Employment Opportunity Commission (EEOC) issued guidelines on what considerations to take into account before an adverse effect completes.

‘A Summary of Your Rights’ under FCRA

Along with sending the adverse action notice, the company must also send ‘A Summary of Your Rights’ under FCRA. Some states may require other notifications along with ‘A Summary of Your Rights’ under FCRA. Some of the other notices required to be sent out are California’s Notice Regarding Background Checks, New Your Correction Law, NYC Fair Chance Action Notice, and Washington State FCRA Disclosure.

Background checks for employment are an excellent way for a company to screen their potential employees and can have great results for their company. Background checks offer companies a way to verify who a person is and if a person would be a good fit for their company.

Becoming a Peopletrail customer is a simple smooth process. We start with a discovery call to assess your specific business to understand your processes and any glitches. Not all companies do things the same way. Once we can grasp your issues, understand your procedures, we propose a flexible screening solution that works best for your hiring process.

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