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Why Inaccurate Background Checks are Risky Business


Data is one of your company's most important assets; it can help you make smart decisions and manage the activities associated with overseeing your team. But employee data can be compromised by inaccurate background checks. False or incorrect information found during a background check can impact businesses in different ways. For example, reporting incorrect information to government agencies may result in fines or penalties. Still, according to one Society for Human Resource Management (SHRM) study, 53 percent of companies don't use background checks in their hiring process. Here's more on why a strong background check process can be essential for your company and how to get started.

What Are Background Checks?

Background checks can be an important step in your hiring process. Where permitted, they may allow a prospective employer to understand a candidate's history, including whether they have a criminal history, financial challenges, or industry-specific citations. Please note that obtaining criminal history and performing credit checks may be prohibited depending on the jurisdiction and the position. Further, jurisdictional restrictions may impact how and if information obtained from a permitted background check can be used in an employment-related decision.

It's important to understand why you need the background check information and to understand that local, state, and federal regulations may restrict the information you are permitted to obtain prior to an offer of employment.  In situations where checks are allowed, failing to conduct a background check or to uncover accurate information could lead to devastating consequences.

Federal Guidelines for Background Checks

Different federal agencies have addressed whether and for what purpose background checks can be used as a screening tool for employment and termination of employees.

The Fair Credit Reporting Act and similar state laws allow people a chance to rebut and build their defense against inaccurate, incomplete, or false background checks. The Equal Employment Opportunity Commission (EEOC) has provided guidance on this issue as well.

The Occupational Safety and Health Administration (OSHA) raises questions of background screening for signs of violence. In the wake of fatal shootings and other violent events in the workplace, OSHA has proposed voluntary regulations that companies have a clear background check strategy in place. If an incident occurs and a company is found negligent regarding background checks, the company could be found liable under tort law.

Using an Employment Screening Resource (ESR)

It can be challenging to capture the full range of information needed to successfully complete a background check. Many companies choose to partner with an ESR for their employment screening services. An ESR firm can help conduct tasks such as tracing social security numbers, verifying Form I-9s and other submitted paperwork, conducting criminal and financial background checks, accessing civil and driving records, and conducting drug testing and industry specific background checks.

While negative information from a background check can cause problems and delays in your hiring process, you can help avoid issues by establishing a clear background check plan, understanding the laws that govern your activities, and working with companies that specialize in employment screening.


This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.