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The Importance and Value of Pre-Employment Background Checks

Human Resources

Small-business owners might wonder if including a pre-employment background check during the hiring process is worth the additional time and expense. But when seriously considering a candidate for an open position, it can be  very important to consider conducting a background check. It can offer employers the potentially valuable benefits of:

  • Hiring well-qualified candidates
  • Reduced employee turnover and the related expenses
  • Limiting exposure to claims of negligent hiring

When is the right time to conduct a background check? In general, the process should take place after initial applicant screening procedures are complete and an employer has made a conditional job offer. Once the process is underway, employers should not permit the new employee to begin working until the background check is complete.

Hiring the Best

Simply having a pre-employment screening program in place could discourage applicants with a troubled history from applying for an open position. Since the Society for Human Resources Management estimates that as much as half of all resumes and applications contain false or misleading background information, the background check can help verify candidates’ qualifications before interviewing has even begun.

A background check can help ensure that only qualified individuals are considered for the job. Eliminating unqualified candidates can also mean  less likelihood of having to terminate an individual later on and incurring the additional expense of starting the recruitment process all over again.

Types of Background Checks

There are a variety of background checks that employers can utilize to obtain candidate information, including motor vehicle reports, national criminal search, national sex offender search, and the terrorist watch list, to name a few.

Employers can make use of consumer reporting agencies to obtain background information on job candidates. Employers who utilize Consumer Reporting Agencies must comply with the applicable guidelines in the Fair Credit Reporting Act (FCRA) and applicable state laws, including but not limited to the following:

1. Request applicant sign a separate disclosure and release form. When the job seeker completes the employment application, the applicant should sign a consent form declaring that the potential employer is seeking a consumer credit report as part of a background check. He or she must also receive a Summary of Rights explaining his or her rights under the FCRA. An investigation cannot proceed without this signed consent form.

2. Notify applicant of negative report findings before taking action. If the report includes information that may cause  the employer to disqualify the applicant, the applicant must receive a Pre-Adverse Action Letter, a copy of the consumer report, and a copy of his rights before any negative action is taken.

3. Make a hiring decision. If the applicant fails to respond or can't provide information explaining the negative findings, the employer can proceed with the decision not to hire. But before taking this action, it's best to seek legal counsel to protect against any exposure to litigation or  violations of state or federal law.

4. Notify applicant of decision. Disqualifying a candidate requires the employer to provide appropriate notice to the applicant in compliance with FCRA guidelines, including an Adverse Action letter, copy of the report, and a copy of the Summary of Consumer Rights.

5. Dispose of findings and records. In compliance with the Fair and Accurate Credit Transaction Act,  the employer is required to properly dispose of the background report information and records to guard against unauthorized access to or use of the information.

Employers should be aware that credit checks and criminal history inquiries may be restricted and/or mandated by federal guidance from the Equal Employment Opportunity Commission as well as applicable state laws. The best practice  is to consult with an attorney who is familiar with those requirements.

Protect Against Negligent Hiring Litigation

A potential benefit of a consistent pre-employment, post-offer background check policy may also include helping your business avoid claims of negligent hiring. By conducting background checks following a conditional offer of employment and prior to the applicant starting work, businesses may be able to reduce their exposure to claims of negligent hiring and the associated litigation costs.

Making a comprehensive background check an essential part of the hiring process can benefit your company. For more information, learn about Paychex Employee Screening Services.


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.
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