6 Common Background Check Pitfalls & How to Avoid Them

Background check lawsuits continue to be on the rise. In fact, a new compilation of court records finds that over the past decade employers have paid out $174 million to resolve background check-related class action lawsuits.

This article was written by Jared Callahan, Senior Industry Consultant at Checkr.

As high as that price tag is, it’s not the only cost. There’s reputational damage to customers, investors and even potential employees who may rethink working at these companies. 

The good news is that most of these mistakes — all of which I’ve witnessed over the course of more than 20 years in the background check industry and 10 as a private investigator — could have easily been avoided. With that in mind, I’ve outlined six of the common pitfalls companies run into and how you can avoid them: 

1. Automatic decision making: While it may be tempting to put a blanket policy in place that your company won’t hire those convicted of certain crimes, it’s not a good idea. 

In fact, the United States Equal Employment Opportunity Commission (EEOC) advises organizations to conduct a nature-time-nature review of candidate background reports. In other words, what was the nature of the offense? How long ago did it happen? And what is the nature of the job for which they are being considered?

Snap judgements are rarely the best ones, and the EEOC’s test encourages all organizations to assess individual situations differently and with due consideration for context.

2. Overlooking the adverse action process: Saying “No” can be difficult, but deciding not to move forward with an employment offer (or retracting one) based on a background check requires more of a dialogue. 

The adverse action process was intended by the Fair Credit Reporting Act (FCRA) to allow candidates to not only be informed of a decision, but to have an opportunity to dispute any potentially inaccurate information. This should include a pre-adverse action notice, which needs to include a number of notices and attachments, including a copy of the report, an FCRA Summary of Rights, and state disclosures as applicable. Once the reasonable waiting period has passed (see below), the employer should provide the candidate with its final decision.  

Employers can still choose not to move forward with a hire, but failing to complete this two-step process by providing the candidate with a preliminary adverse decision can be a legal landmine.

3. Failing to give adverse action the proper timeline: Filling a vacant role or scaling up a workforce is often tied to a sense of urgency but the adverse action process also requires a waiting period. 

Under the FCRA , organizations are required to  wait a “reasonable amount of time”— five business days or seven calendar days, according to the Federal Trade Commission — to allow the candidate to correct any potentially inaccurate information.

4. Intersection of Federal and State Requirements: The FCRA requires that organizations provide a standalone disclosure—advising candidates they are running a background report when a background report is being sought for employment purposes. Separately, some state laws—for example, California—also have their own state law disclosure requirements. While it may be tempting to collapse the two disclosures into one document for ease of presentation, organizations must keep in mind the different requirements imposed by different laws.  

Here, both the FCRA and CA state law require a separate standalone disclosure. The U.S Ninth Circuit Court of Appeals held that the disclosure required under the federal FCRA can consist only of the FRCA disclosure, and it cannot be combined with disclosures required under other state laws. This is just one example of where federal and state laws may intersect in the background check process.

5. Assuming integration with third-party applications: For years, organizations have been automating elements of the hiring process with applicant tracking and HR information Systems. 

In some cases, those systems might not work with your background check vendor. When that happens, candidates might not see forms displayed properly, which means they can’t provide the necessary information in a background check. As an employer, it’s your responsibility to make sure your technology allows you to maintain fair, compliant hiring practices.

6. Relying on manual background checks: The background check process used to be largely manual, requiring judgment calls made by humans. 

Besides the fact that this process often wasn’t fast enough to keep up with high-velocity hiring needs, it was prone to error. And it can still be — leading to non-compliant background checks. 

That said, technology doesn’t fully replace the need for human involvement in background checks, but it does help reduce the errors and bias that can lead to lawsuits. You’ll want to work with a vendor who relies on both technology and humans to deliver accurate results. 

It’s often that moment between a “yes” or a “no” where mistakes happen and companies face legal action. The more aware organizations are of the pitfalls — and the better they prepare their teams and choose the best possible partners — the less likely they are to find themselves facing fines, bad headlines, and an even worse reputation among the candidates they want.

Jared Callahan is a licensed private investigator in California and Texas with 20+ years of experience in the background check industry. He’s presented to various organizations, such as the National Human Resources Association and Employment Advisory Council, and has been quoted in Inc. Magazine, The Washington Post, and MSN Money.