What Employers Need to Know About Performing Background Checks

Stefani M. Butschle, Esq. Director of Human Resources and In-House Counsel


When employers look to hire new employees, pre-employment investigations and/or background checks are important to verify the accuracy of the information provided as well as to ensure that the applicant is the best-qualified individual for the open position. With the vast array of online background check options, employers are increasingly taking this convenient path to information seeking.  However, as with most employment practices, there are various state and federal requirements for conducting such checks.  Some of the common checks conducted are listed below, along with some of the pitfalls associated with each.

1. Criminal Record

Employers may investigate an applicant’s criminal conviction record for instances related to the position and consistent with business necessity.  Laws regarding how much information an employer may obtain about a person's criminal record, and its use for hiring decisions, varies from state to state.  Generally, an employer should not be retracing criminal history of applicants beyond the past seven years.  Further, before rejecting a candidate with a conviction, employers should consider the relevancy of the conviction to the job, the nature of the conviction, the number of convictions, any rehabilitation efforts, and the applicant’s fitness for the job before using it as the basis for hiring decisions.

According to the EEOC, the following factors are key to assessing whether an exclusion is job related for the position in question:

(a) The nature and gravity of the offense or conduct.

(b) The time that has passed since the offense or conduct and/or            completion of the sentence.

(c)  The nature of the job held or sought.

2. Credit Report

Credit reports obtained for employment purposes are regulated by the Fair Credit Reporting Act (FCRA), and are generally only permissible when there is a close relationship between credit information and job performance.  An organization is required to prove that an applicant’s financial stability is relevant to the job to conduct such a check.

Additionally, before running a person's credit report, an employer must obtain written permission from the applicant.  A copy of the report must be given to the applicant if he or she will not be hired, and the employer must let the candidate know his or her right to dispute any items on the report under the FCRA.

3. Bankruptcy

The Federal Bankruptcy Act bars employers from refusing to hire someone solely because the applicant or someone associated with the applicant (1) has filed for bankruptcy, (2) was insolvent prior to filing for bankruptcy, or (3) has failed to pay a debt dischargeable in bankruptcy.  Although this information is public record, and would appear on any credit report conducted, employers must be very careful not to discriminate against an applicant upon this basis.  Additionally, it would not be in an employer’s best interest to conduct such a check unless fulfilling the same requirements for a credit check.

4. References

References are often used for judgments of character of applicants, to confirm or supplement resume information, or for employment verification.  Prior to conducting reference checks, even on individuals provided by the applicant, it is prudent for employers to have the candidate sign a release.  Not only does this protect the employer should they use information obtained in hiring decisions, but could also facilitate retrieving the information sought as some industries, such as schools or hospitals, will not release information without a signed release.  This release could simply be disclaimer language contained within an employment application requesting references that must be signed off on by the applicant.

5. Lie Detector Test

Most private companies are prohibited from using these types of tests against applicants or employees due to the Employee Polygraph Protection Act.  Businesses providing services such as armored transport, guard duties, alarm services, pharmaceutical distribution or other forms of manufacturing and distributing may be exempt.  These exemptions are very narrow and follow a complex set of procedures – employers should take care to ensure they are exempt before proceeding.  While no federal law exists specifically prohibiting honesty tests being used for hiring decisions, such tests are considered violations of state privacy laws.

6. Medical History

The Americans with Disabilities Act (ADA) prohibits employers from discriminating against applicants due to mental or physical impairments.  However, for certain jobs, a mental or physical condition may prohibit a person from performing necessary job duties.  Employers are allowed to inquire about a person's ability to perform specific tasks, or have an applicant describe or demonstrate their ability to perform specific tasks, rather than request medical information.  It is not until a conditional offer of employment has been made that an employer has the ability to ask medical-related questions, require medical documentation or require medical examinations.

7. Military History

Military service records may only be requested and obtained under very specific circumstances.  Although some military information may be requested, such as the service member's salary, name, rank, duty list, duty status and any awards, any additional information will not be provided without the consent of the service member.  Additionally, there are rules surrounding the release of discharge information and paperwork.  Employers must be cautious not to seek information that could lead to disparate treatment due to this protected status.

8. Workers' Compensation Claims

Although workers' compensation claims are public records, employers need to be aware of the risk of such screenings in terms of potential ADA claims, as well as state laws prohibiting retaliation for filing workers’ compensation claims.  This information can be used for hiring purposes if the employer is able to prove the injuries the applicant sustained would interfere with the candidate’s abilities to perform necessary job duties, or to determine if an applicant has misrepresented their ability to perform job duties.  Again, this is a search that should be conducted after a conditional job offer is extended to keep discrimination claims at bay.


Overall, when conducting pre-employment investigations and background checks, employers should consider the following general guidelines:

  • Use pre-employment investigation tools that are reasonable, appropriate, and relevant to the position for which the applicant is applying.
  • Pre-employment investigations should be consistently implemented with all candidates, regardless of class or position.
  • Pre-employment investigations should be conducted by persons with special training such as a reputable investigative service.
  • All information must be evaluated in compliance with the Fair Credit Reporting Act (FCRA), the Americans with Disabilities Act (ADA), Title VII of the Civil Rights Act (Title VII), and any other applicable state and federal law. See the Fair Credit Reporting Act section later in this document.

It is important for employers everywhere to know their state's laws and federal laws regarding information collection on applicants. Keep in mind that laws often change from one year to the next, so staying current is also important. To learn more or for answers to questions on this topic, discuss concerns with an agent.

The information contained in this post is for informational purposes only and not for the purpose of providing legal advice or assistance.  For information regarding your specific responsibilities, you should contact your attorney.