Background Checks - Know the Law / HR Solutions / Last Modified: February 22, 2017

Know the rules governing background checks, not just at a national level, but also within a state, county, or city.

The rules governing background checks are not only established by each country's national government, but also by subdivisions, such as states, counties, and cities. For example, some jurisdictions prohibit basing decisions on records of arrest rather than records of convictions. Many large organizations also have their own internal rules for what may or may not be included in screenings.

Most background check providers are thoroughly familiar with the screening laws in the territories in which they operate. It's when you try to do your own screenings in-house that you need to be very careful about complying with the laws in your jurisdiction.

The U.S. federal law governing background screening in the United States is the Fair Credit Reporting Act (FCRA). The act comprises many rules for credit-reporting bureaus, such as how far they're allowed to go back in order to check on and report on an applicant's credit history. But even if you're using a credit-reporting agency to do your screening, you must follow a few important rules when initiating credit checks:

  1. Employers have to obtain the written consent of applicants and existing employees before viewing their credit reports.
  2. Employers must provide applicants and employees a summary of their rights under the FCRA before taking an adverse action against them based on a credit report.
  3. Applicants have the right to obtain a copy of their credit reports and dispute erroneous or incomplete information with the credit-reporting agency after they've been rejected based on negative information in a report.


Background checks have changed a lot in just the past couple years, thanks to the increasing computerization of vital records, as well as to challenges associated with a difficult economy. Let's take a look at some of these trends.

  • Dishonesty in Applications and Resumes
    The recession of 2008 resulted in many more unemployed people taking longer and longer to secure jobs. As the challenge to find work increased, so did the temptation to stretch the truth on job applications and resumes. Over the past five years, employers in all industries have reported a marked increase in the number of cases where job applicants were less than truthful.
  • Increased Relocation Across State Lines
    People don't stay in one place as much as they used to. Between traveling for work, school, and employment, people are moving across state lines more than ever before. Background checks become more challenging to perform as more applicants change locations.
  • More International Employees
    The labor force isn't just fluid within the United States. Many people are working both domestically and abroad. As such, collecting information from outside the U.S. can be difficult and time-consuming.
  • Stricter Privacy Laws. In the United States, Europe, and elsewhere, new laws have been enacted restricting the amount of data that can be maintained on someone; as well as legislating who has access to that data and what it can be used for. Three states prohibit using credit-report information for making hiring decisions. Similarly, the federal government prohibits credit-reporting agencies from going back more than seven years to obtain a credit history on an individual.
  • Checking Social Networking Sites
    It has become a common practice for employers to review Facebook pages and other social networking sites to prescreen candidates for employment. However, some states are curbing this practice. In Maryland, Illinois, and California, for example, it's illegal to ask job candidates for passwords to their online accounts.
  • Integrating Background Checks with Other HR Systems
    Many background check providers use the service as one element of a larger human resources (HR) system. For example, many trucking companies purchase not only an initial background screening on drivers, but also one that checks every month for traffic violations-whether these infractions occurred on the job or off. Some HR systems automatically flag data in a report that is beyond a threshold set by the company, thereby eliminating the need to scrutinize screening reports on candidates who fail to meet minimum qualifications.
  • E-Verification of Employment Eligibility
    Perhaps the simplest type of background check is to determine whether an applicant is qualified for employment in a particular state. Many states have set up electronic verification (e-verify) systems so that employers can quickly check the accuracy of a Social Security number, as well as whether or not the candidate can be legally employed.
  • Better Data, Lower Prices
    No trend is more obvious in background checks than that of higher-quality information at a lower cost. The availability of computerized records has made background screening services ultra-competitive. More of the process is automated than ever before, and prices for basic checks have plummeted. The security of the entire process is better than ever, and turnaround times have dropped from a few days to a few minutes for basic checks. For these reasons, it costs less than ever-and takes less time-for a business to protect itself from fraud and misrepresentation. The question is no longer: "Do I really need a background check," but "Why wouldn't I use this simple, low-cost method to avoid problems down the road?"


  1. Use a Vendor. Yes, you can do background checks yourself, but do you have the staff to research state laws and make sure you're in continual compliance? Given the brisk competition and low prices for background screening services these days, you're better off putting a third party between you and the ultimate decision. If there's a lawsuit, it's the background screening firm-not you- that bears the greatest liability.
  2. No Hit, No Fee. Some background check services are so confident that they'll unearth something amiss that the report is free if it doesn't turn up anything negative. They call it "no hit, no fee." Be sure to ask if your vendor offers such a guarantee.
  3. Check Social Networks. Several states have ruled that employers cannot require applicants to reveal their social networking passwords-but you're free to see what you can dig up without one. You might be amazed by what you'll find. A 2012 survey of 300 employers showed that over 90% reviewed an applicant's social networking activities before extending a job offer, and an astonishing 69% said that they've rejected a candidate as a result of that search. Ask your vendor for a price that includes social networks in the screening package.

Basic Screening (1 day) $20-$55

  • Social Security number verification
  • Social Security address verification
  • National criminal database search
  • State sex-offender registry search

Advanced Screening (1-3 days) $55-$150

Federal court records search
State court records search
County court records search
State Department of Motor Vehicles search
Drug testing ($30-$100 per test)

Custom Screening Services (time and pricing varies)

FBI fingerprint check (2-5 weeks)
Presenting results to candidates
Continual monitoring ($10/month/employee)
Auditing current compliance


Adverse Action Letters: The Fair Credit Reporting Act (FCRA) requires that candidates receive advance notice, called a "pre-adverse action letter," if a credit, housing, or hiring decision might be based on information from a background check. The FCRA also requires an "adverse action letter" when a candidate has been declined based on a background screening. An adverse action letter must identify the company that provided the background report, as well as a way to contact the provider.

Conditional Job Offer: A job offer extended on the condition that an employee passes a background check. This allows companies to hire before receiving screening results.

Equal Employment Opportunity Commission (EEOC): A division of the United States government executive branch, the EEOC sets rules and regulations for what you're allowed to investigate when doing background screenings on employees, candidates for employment, or contractors.

E-Verify: A Web-based program operated by the Social Security Administration to assist employers in determining whether an employee is eligible to work in the U.S. and whether the employee's Social Security number is valid.

Fair Credit Reporting Act (FCRA): A U.S. federal law governing credit-reporting practices, including what you're not allowed to screen for when conducting background checks related to lending, housing, or other contracts. Enforced by the Federal Trade Commission.

Human Resource Management System (HRMS): Also called a human resource information system (HRIS), this is a broad collection of software and practices for managing the process of hiring and evaluating employees and potential candidates.

National Association of Professional Background Screeners (NAPBS): A trade group that establishes standards for background screening practices and offers training programs and certification programs.

No Hit, No Fee: A practice among some screening services to provide a background report without charge if it doesn't unearth anything amiss about the candidate.


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