Compliance and Legislation

Background checks are an essential tool for any employer. Background checks can help employers vet job candidates, look for potential red flags, and dodge negligent hiring claims when used correctly. While conducting background checks is a vital due diligence step for any business, employers must understand the various compliance laws associated with background checks. Failure to observe background check compliancecan render employers vulnerable to legal action from job applicants and watchdog organizations such as the Equal Employment Opportunity Commission. This page will explore the nuances of background check compliance and regulation to provide a valuable resource to help employers get compliant and stay compliant.

First, it is important to note that employers do not have free reign to use background checks or criminal background information in any way they please throughout the hiring process. Instead, the use of these checks and the details they uncover are regulated under laws and ordinances. Those rules can sometimes vary from one state to the next and even from county to county or city to city.

Read on for a brief overview of the background check compliance that employers must consider when putting together their pre-employment screening policies.

The Fair Credit Reporting Act

Perhaps the most significant piece of background check compliance for employers to know about is the Fair Credit Reporting Act. The Fair Credit Reporting Act, or the FCRA, is a federal law, which means that all employment-related background checks must be compliant with the document regardless of the employer’s location, industry, sector (public versus private), or other distinguishing factors.

The FCRA officially became law in October 1970 and has been the key legislation on background checks ever since. Lawmakers initially proposed and passed the law to protect consumers from potentially erroneous information in their credit reports. Credit cards were introduced in 1950 and gained prominence in American life in their first two decades. Eventually, the popularity of credit cards led to the creation of credit reports. The problem was that credit scoring wasn’t initially standardized or regulated, which meant that consumers had no recourse if a credit reporting firm reported inaccurate data about them. Moreover, at the time, credit reports went beyond what they are now and included more personal details about character, personality, and even health. Lawmakers were uneasy about the extent of the information contained in these reports and about the fact that the reports gave no power whatsoever to the consumers themselves.

That sense of unease eventually led to the enactment of the FCRA, which created a framework to give consumers more rights. Specifically, the FCRA required that employers and other entities seeking background check information about a consumer disclose their intentions and get the person’s express written consent before proceeding. The FCRA also laid forth steps that a searcher had to take before pursuing any adverse action against a consumer based on background check findings. Specifically, the law outlined ways for consumers to review their own background check reports and dispute information they believed to be erroneous.

In 1970, when it was passed, the FCRA was one of the first data privacy laws in American history. Today, it still exists and continues to serve the same basic purpose: to ensure that businesses respect the rights of the consumer throughout the background check process. More than 50 years after its adoption, the FCRA is still the law that requires employers to notify job candidates in writing of their intention to conduct a background check. This notification must be presented separately from all other job application materials, though it can be bundled with an authorization form.

From there, if an employer wishes to rescind or deny a job offer based on the background check, they must again notify the applicant in writing and provide the candidate with a copy of the background check report and a summary of their rights under the FCRA. Following this notification process, the applicant must be given five days or more to respond to the notice or dispute the background check findings.

Our Learning Center has more detailed information about the FCRA, what it means for employers and the background check process. Click here to learn more about FCRA compliance. We also regularly explore FCRA-related topics on the backgroundchecks.com blog, such as with this post: “FCRA Compliance Requirements for Employers Running Background Checks.”

The Equal Employment Opportunity Commission

The Equal Employment Opportunity Commission (EEOC) is a federal agency that enforces laws related to civil rights in the workplace. More specifically, the EEOC works to fight employment discrimination in all forms. One of the ways the EEOC combats employment discrimination is by issuing EEOC guidance on background checks.

The EEOC’s background check guidance is designed to ensure that employers comply “with federal laws that protect applicants and employees from discrimination” using background checks. If a background check policy leads to discrimination based on race, gender, religion, age, or similar factors, the EEOC may file a lawsuit against the employer to enforce civil rights.

To abide by EEOC guidance, employers should ensure that they administer background checks as equally as possible, regardless of the applicant. Said another way, all the finalists for a particular job should undergo the same background check irrespective of race, color, sex, and other factors. A background check policy in which you only vet the criminal records of candidates of a certain race or background is discriminatory and at odds with EEOC guidance.

The EEOC doesn’t just watch for blatant surface-level discrimination in the pre-employment background check process. Employers that require all candidates to undergo the same background check can sometimes have discriminatory background check policies. That’s because employers often slip into discriminatory patterns without even meaning to do so when using the information found through background checks.

When making employment decisions based on background check findings, all employers must look out for what the EEOC calls “disparate impact.” If a background check or hiring policy disproportionately disadvantages candidates “of a particular race, national origin, or another protected characteristic,” it violates EEOC guidance if the policy can’t be proven to “accurately predict who will be a responsible, reliable, or safe employee.” For instance, refusing to hire a candidate with a criminal record qualifies as disparate impact, as minorities are often statistically more likely to have a criminal history.

Instead of using a blanket policy, employers can avoid disparate impact by identifying specific criminal convictions that would call into doubt a candidate’s ability to perform a specific job responsibly, effectively, safely, or legally. The best strategy is looking for criminal history specifically relevant to the position. For instance, a shoplifting conviction may be worth considering when the candidate is seeking a job in retail because the conviction is relevant to the position and the work environment. If the candidate is seeking a web design job, it would be harder to justify disqualifying that person based on their shoplifting conviction.

The EEOC also recommends that employers consider other details around a criminal conviction when weighing whether to take adverse action against a job candidate. The amount of time that has elapsed since the conviction is relevant, as is the question of whether the subject is a repeat offender. In most cases, employers should give less weight to convictions if they are years in the rearview and the candidate has an otherwise clean record.

Click here to read more about EEOC compliance.

Ban the Box Compliance

Unlike FCRA and EEOC compliance, which apply to all employers, ban the box is a policy that only some employers must heed. Ban the box refers to a legislative trend sweeping the nation over the past decade. The “box” in “ban the box” refers to the tick box on a job application where applicants indicate whether they have ever been convicted of a crime. Legislators have worked to pass laws and ordinances that “ban” the box, prohibiting employers from using this question on job applications.

Ban the box legislation does not bar employers from conducting background checks. In most cases, though, ban the box policies do delay when employers can bring criminal history into the pre-employment discussion. Without ban the box, employers are free to ask about criminal records on applications or during the initial job interviews. They can also conduct background checks on candidates, provided they comply with FCRA and EEOC requirements.

Criminal history is off the table for job applications and interviews with ban-the-box policies. Many policies also require employers to wait until after making a “conditional offer of employment” to conduct a background check. These policies aim to give job seekers a chance to prove themselves and their qualifications without being immediately flagged as “criminals.”

Often, employers make up their minds about candidates who disclose their criminal history early in the hiring process. In some cases, this judgment isn’t even a conscious or deliberate one. Instead, many hiring managers have an unconscious bias against people who have been convicted of a crime. As a result, it can be extremely difficult for even the most skilled, qualified, well-spoken ex-offenders to prove themselves once they have checked the “yes” box next to a criminal history question. Proponents of ban the box legislation hold that employers are more likely to give ex-offenders serious consideration if they get to know the candidates before criminal history enters the conversation.

According to the National Employment Law Project (NELP), 37 states and 150 cities and counties throughout the United States have passed ban-the-box policies. Many of these policies only apply to public employers, such as government offices or agencies. Others extend to vendors or contractors that do business with the government.

Ban the box laws apply to private employers in far fewer cases, though those policies have grown more common in recent years. As of June 2022, NELP reported that 15 states and 22 cities or counties had extended their ban-the-box legislation to private companies.

Therein lies one of the most important things to remember about ban the box laws: there are more and more every year. New ban-the-box laws develop consistently from city and county commissions to state lawmakers to the United States Congress. To remain compliant, employers should not only check the laws and ordinances where they are based but should also keep an eye out for new laws or statutes that might bring the ban-the-box trend to their backyards.

Click here to read more about ban the box policies. We also invite you to follow our blog for regular updates on the latest background check compliance and regulation updates, many of which focus on the latest ban the box updates in different parts of the country. These resources can help you navigate hiring in the age of changing background rules.

Social Media Compliance

As social media sites such as Facebook, LinkedIn, and Twitter have become increasingly popular, it has become more common for employers to research candidates online before hiring. This process, known informally as a “social media background check,” can sometimes help employers spot red flags that they wouldn’t see otherwise.

For instance, an employer might want to see if a candidate has a habit of badmouthing their boss on Facebook. Employees speaking negatively and publicly about the companies they work for can damage an employer’s brand, so it isn’t hard to see why employers look for these types of online behavior.

Employers also often use social media background checks to discover whether a candidate has a habit of using racist, sexist, or otherwise hateful language. Employers have an obligation to create a safe, welcoming environment for all, regardless of skin color, gender, or other factors. A candidate with a bigoted worldview can put workplace culture at risk – not to mention make employers vulnerable to potential legal trouble.

While finding these issues on social is attractive to employers, social media background checks themselves are a legal minefield. Some states have laws that limit how employers can approach these checks.

Even in areas with no social media background check laws on the books, serious problems run rampant with these types of screenings. For example, reviewing a candidate’s social media profiles can sometimes lead to employers discovering details about a candidate that lead to bias or discrimination in hiring. People often freely share information about themselves on social media that no employer is allowed to ask about on job applications. Examples include sexual orientation, gender identification, and national origin. By revealing this information, a social media background check may compromise a hiring manager’s ability to make an unbiased hiring decision. In turn, if an employer chooses not to hire someone because they learned through a social media background check that the person is, for example, transgender, that employer has put themselves at risk for a discrimination lawsuit.

Click here to learn more about the dangers of social media background checks.

Credit History Checks

Credit history checks are a popular safeguard for jobs involving finances, accounts control, or interaction with sensitive consumer financial information. Employers in these sectors reason that a candidate’s personal financial habits and history are relevant to the jobs at hand. If a person has a history of debt, bad credit, late payments, or other negative financial indicators, that may speak to their ability to manage financial matters responsibly in their daily work.

However, some states—including California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington—prohibit or restrict these checks in an employment setting. Critics of credit history checks say that personal financial history doesn’t necessarily directly relate to a person’s sense of responsibility with money in a professional environment. Debts or bad credit can result from many factors, from a person having to pay their way through college to a sudden medical expense. Furthermore, critics say denying jobs based on poor credit history is a further obstacle to struggling job seekers finding gainful employment and resolving their financial woes. The laws against credit history checks largely follow these viewpoints and ban or restrict these types of background checks to remove potentially unfair entry barriers for employment.

In general, employers considering using these types of checks should think about the relevance to the job at hand. In most cases, even the laws that restrict credit history checks have exceptions for specific employers, particularly in the financial realm. For many jobs, though, credit history has no direct relation to the job at hand and shouldn’t be used as a reason not to hire someone.

For more information about credit checks and their restrictions, read our white paper about credit history.

Salary History

It’s not uncommon for employers to have a section in the job application asking candidates about job and salary history. As with credit history checks, this strategy may be illegal depending on where your company is based. Seventeen states and 19 local jurisdictions have passed laws that limit employers’ ability to obtain a candidate’s pay history. Employers should check their local and state laws or consult an attorney before incorporating salary history sections into their job applications.

Arrest History Information

In most cases, employers run criminal history searches to discover criminal convictions in a candidate’s background. Arrests that didn’t lead to a charge, ended in the dismissal of charges, or concluded in a not guilty verdict are less compelling to employers because they don’t offer the same proof of guilt as an arrest that pairs with a conviction. However, arrest records are part of the criminal record and sometimes appear on criminal background check reports. Employers inclined to be alarmed by any criminal history might sometimes disqualify candidates based on arrests, even if those candidates have technically never been convicted of any crimes.

However, in many states, employers can consider criminal convictions in their hiring decisions but are legally barred from considering arrest histories. Again, arrests that didn’t lead to a conviction offer no proof of guilt. As a result, employers considering arrest histories as part of the hiring decision-making process risk disqualifying candidates based on crimes they didn’t even commit. Because minorities face disproportionate levels of policing and are more likely to have arrest records, an employment policy that utilizes arrest records can be seen as discriminatory.

At backgroundchecks.com, we exclude arrests from our criminal background check reports. We know many employers don’t realize that laws in their state may prohibit them from considering arrest histories for employment purposes. Instead of leaving it up to employers to know the rules – and rather than excluding arrest histories on a state-by-state basis depending on each state’s laws – we simply don’t include any arrest information in our reports.

To fully explore arrest history and criminal background checks, read our full white paper on the subject.

Drug Screening

Many employers prefer to enforce drug-free workplace policies – and it’s even a legal requirement in some industries. In large part, employers have the right to require drug testing for their employees at the time of hiring and on a random check basis thereafter.

Though many states have now legalized marijuana for medical and/or recreational use, that doesn’t mean employers are not allowed to a drug test or make adverse employment decisions based on drug test results. Take the marijuana legalization law in New York. That law says employers cannot violate employees’ rights to use recreational marijuana but also identifies several broad exceptions.

Specifically, New York’s law recognizes that state or federal regulations require some employers to disqualify candidates or dismiss employees who test positive for marijuana use. The New York law does not preempt these regulations. In addition, the law allows employers to dismiss workers for marijuana use if they are impaired on the job or if the drug otherwise interferes with the employer’s responsibility to provide a healthy and safe work environment. Similar grace is granted to employers around marijuana in other states where legalization is a factor.

Other Compliance Considerations

Background check regulation and compliance can vary depending on several additional factors, including geographic location and industry.

Location

While many of the key regulations employers must follow regarding background checks are the stuff of federal laws, many others are dictated by state or even local laws. Ban the box laws, for example, are largely not federal but are passed and enforced at the state and local levels. Similarly, restrictions on social media background checks, credit history checks, arrest history checks, and other types of background checks depend largely on location.

For these reasons and others, it’s never a bad idea for employers to consult an employment lawyer who can help them navigate their background check compliance obligations based on local and state law. Working with an attorney can also help employers structure their background check strategies and understand the importance of written policies and procedures.

Industries

Many industries have rules and regulations regarding hiring protocols, and those rules and regulations often affect background checks. Transportation jobs – including positions that involve transporting passengers or freight – have background check requirements from the United States Department of Transportation and the Federal Motor Carrier Safety Administration. Those requirements include thorough driving history checks, drug and alcohol screenings, physical examinations, and more.

Similarly, other industries – from healthcare to education and construction to cannabis – have their own regulations and requirements for background checks. Again, employers should consider consulting with a legal professional for help understanding the regulatory steps they must complete to stay compliant with industry requirements.

Conclusion

At backgroundchecks.com, we offer a wide range of resources to help employers learn about background checks and navigate the nuances of compliance and regulation. We invite you to visit our Learning Center to explore articles about the FCRA, the EEOC, ban the box, arrest records, and more.

FAQs

Per the Society for Human Resource Management (SHRM), negligent hiring is defined as a situation where an employer “is liable for harm its employees inflict on third parties when the employer knew or should have known of the employee's potential risk to cause harm, or if a reasonable investigation would have discovered the risk.” For instance, if a transportation company hired a driver with a history of DUIs, that company could be held liable if the driver caused an accident that left others injured. In that case, a thorough investigation into the applicant’s past could have uncovered the risk the driver posed, enabling the employer to avoid said risk.

Read our blog post about negligent hiring to learn more.

As laid forth in the SHRM definition above, an employer can be sued for negligent hiring if their employees inflict harm on third parties “when the employer knew or should have known of the employee's potential risk to cause harm, or if a reasonable investigation would have discovered the risk.” Often, not running a thorough background check is why employers leave themselves vulnerable to negligent hiring lawsuits.

In some industries, such as transportation or healthcare, background checks are required by state or federal law. More often, though, employers decide for themselves to run background checks as a means of avoiding risks. Negligent hiring and other legal liabilities are top concerns for employers who skip background checks. Still, even beyond those threats, the fact remains that background checks lead to safer work environments, more peace of mind for coworkers and customers, more informed hiring decisions, better employee retention, and more.

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