The Necessity of Background Checks

in Background-check

The overall success of any organization is dictated by its employees. Certainly superior products and/or services are a requisite ingredient, but an organization's human capital will make the ultimate determination of overall success. As such, particular emphasis should be placed on the skills, experience and background of all employees.

The value of running thorough, comprehensive background checks greatly outweighs the perceived deterrents of cost, time and effort required to conduct the exercise. Simply considering the cost of replacing an employee, it behooves an employer to ensure it has identified and retained the best candidate for any position within the organization.

A few facts demonstrating the importance of good screening tools when making a hiring decision:

  • News articles report one-third of all application forms contain outright lies.
  • Studies show 3 out of 10 business failures are caused by employee theft.
  • Replacing supervisory, technical and management personnel can cost from 50 to several hundred percent of the person's salary. (Society for Human Resource Management, 2008)
  • Research concludes that average awards in workplace violence lawsuits exceed $1 million.
  • The average settlement of a negligent hiring lawsuit is nearly $1 million. (Human Resources Management, 2008)

Federal and State Laws Surrounding Background Checks

Federal and state laws require background checks for certain positions. The importance of understanding any and all background check requirements for your particular industry cannot be stressed enough. For example, most states require criminal background checks for any position that works with children, the elderly, or the disabled.

In the federal arena, employee background checks are governed by The Fair Credit Reporting Act (FCRA), which sets the standards for employment screening. The FCRA uses the name "consumer report" to define a background check as well as a credit report and imposes strict, definitive guidelines concerning reported information. For example, employers are required to obtain consumer consent to conduct a background check and are thereby required to provide notification if negative information is reported on the background check.

Many states have also passed their own legislation concerning background checks. California has enacted the Investigative Consumer Reporting Agencies Act which has increasingly strict guidelines concerning what can be reported on a consumer report. California has also limited the reporting of criminal convictions to seven years, while the FCRA allows criminal convictions to be reported indefinitely. An increasing number of states are regulating the information that can be reported, how that information is obtained, and how it can be used. Being well versed in the federal and state requirements concerning background checks continues to be of utmost importance.

Use of Background Check Information

The appropriate and consistent use of information found on background checks is key. It is best for an employer to have a sound policy concerning which positions will be subject to background checks and is often considered best practice to conduct background checks, in some degree, to all applicants. Most background check vendors feature multiple packages of background checks, with each package being equipped with a standard set of checks to promote uniformity and consistency amongst all candidates. Based on the position that is being filled, additional checks can be added, such as a driving history for a position that requires travel.

Employers should also remember that simply having negative information reported on background checks cannot be an automatic disqualification for employment. Negative information should be considered when it is job related, such as an embezzlement conviction for the position of Chief Financial Officer. However, if the same applicant with the embezzlement conviction is being considered for a pet grooming position, the conviction would not be relevant to the job and could not be considered as an automatic bar to employment. Be aware that if an employer engages in the practice of automatic disqualification for any/all negative information returned on background checks, particularly if the information is immaterial to the position, it opens the door to potential discrimination claims.

A Valuable Resource

Like the labor and employment law environment in California, best practices and compliance must be observed when conducting background checks. Given the innumerable amount of regulations and potential for substantial penalties for any failure to comply, it is very important to identify a reputable vendor for background check services.

Human capital being the most important component of your organization's success, identification of the best candidate to join your organization remains a priority. While keen observation and compliance of federal and state laws is essential, the work involved in the screening process is vastly outweighed by the addition of a valuable new team member armed with the appropriate skills and experience to make a positive impact on your organization.

  • The Fair Credit Reporting Act
  • California Investigative Privacy Laws
  • Using Consumer Credit Reports : What Employers Need to Know
Author Box
Michele O Donnell has 1 articles online

Michele O Donnell, M.S. Human Resources Management. joined MMC, Inc. in January 2007 and currently leads MMC's elite team of HR Consultants. Ms. O Donnell has been involved in the Human Resources industry for more than 14 years, bringing vast training and management experience to the MMC leadership ranks. Her experience spans the broad scope of labor law, regulatory compliance and HR Best Practices, drawn from her rich experience as Director of HR for several firms throughout her career. She currently works to ensure that MMC's consultants forge long lasting relationships with our clients, fostered in exceptional service and unsurpassed HR expertise. Ms. O Donnell earned her baccalaureate degree in Business Administration from Auburn University before receiving her Masters degree in Human Resource Management from Troy State University. Learn more about MMC's comprehensive HR services at

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The Necessity of Background Checks

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This article was published on 2010/11/04