2024

The State of Screening Compliance

A new survey report highlights background check compliance challenges, regulation updates, best practices, and what they mean for employers.

Report introduction

The state of screening compliance is evolving as a wave of legislation impacting background checks continues to accelerate into 2024. To understand organizations’ compliance concerns and challenges, and how practitioners are managing compliance laws and regulations, Checkr surveyed workers involved in the background check process (who are not current Checkr customers) at companies across the US. Our findings led us to discover seven key insights for our first-ever State of Screening Compliance report.

Insight 1

Employers are finding it difficult to navigate complex web of overlapping laws

The majority of survey respondents have a background check policy, but nearly half (47%) admitted they aren’t completely confident it complies with federal, state, and local regulations, or don’t have one (4%).

Without overarching federal policy for regulations such as Ban the Box or marijuana legalization, states are taking matters into their own hands. New state and local background screening regulations continue to add complexity to an already convoluted map of laws. Our findings suggest that reconciling various state laws, many of which conflict, is becoming increasingly challenging as new laws regulating different types of screenings are implemented.

The Fair Credit Reporting Act (FCRA) is the federal law that all employers must follow to protect candidates applying for jobs, but hundreds of local laws at the state, county, and city levels can also mandate how employers can use background checks during the hiring process – laws such as Ban the Box, salary inquiries, and use of credit screening. Separately, businesses that operate in a highly regulated industry such as Transportation, Healthcare, or Finance may also have distinct legal requirements regarding the types of background checks they run and the disqualifying offenses mandated by these laws.

Are organizations confident their background check policy complies with federal, state, and local regulations?


Complex web of laws and screening regulations makes compliance challenging

FCRA
Legality of marijuana
Ban the box
Salary history
Credit history laws

FCRA is a federal law governing how companies order and consider information contained in a background check. It covers all 50 states, plus Washington DC and Puerto Rico.

What this means for employers:

Not following all applicable background check laws can result in violations and/or fines, as well as potential lawsuits and reputational damage

Small missteps can result in hefty consequences. For each violation of the FCRA, an employer could pay up to $1,000 in statutory damages, or even more in punitive damages. A violation of the California Fair Chance Act, for example, provides the State with the power to order an out of compliance employer to change their behavior and/or compensate a candidate for violating their rights. Class-action lawsuits, which can result in million dollar settlements, can harm an employer’s brand reputation.  

Employment screening processes and procedures are regulated for good reason: How a background check is used can have meaningful impacts on an individual’s livelihood. 

When employers aren’t aware of applicable laws, or are left to sort out the legislative details that apply, it exposes businesses to risk. Especially for businesses in highly regulated industries, such as caring for vulnerable populations, it’s so important to stay on top of background check regulations that matter to your business, and to the safety of those you serve.
Jennifer Thibodeau
Jennifer Thibodeau
Head of Policy at Checkr

While organizations said compliance was the #1 reason for screening… Running afoul of the law was the top concern

Top reasons organizations run background checks

Comply with federal and state laws
Meet industry standards
Improve quality of hire
Maintain a safe work environment
Mitigate business risk and protect against lawsuits
Protect company reputation

Biggest compliance concerns

Violations and lawsuits
Understanding regulations and changing laws
Over- and under- screening
Lack of proper training
Bias during the decision-making process
No one actively managing compliance
Unsure which background checks to use

A background check policy – widely considered to be foundational for organizations that conduct employment screening – can help, but only if employers proactively monitor legislative changes, update the policy to take new laws into account, and most importantly, make sure anyone involved in the background check process follows the procedures outlined to ensure screenings are conducted compliantly and adjudication is carried out in a consistent manner.

Learn more about background check laws and requirements in The Employer’s Guide to Navigating Background Check Compliance →

Insight 2

States are adopting Clean Slate laws at an accelerating pace, with potential to reshape background screening

In the last five years, 12 states have passed Clean Slate laws and the momentum is not slowing down. The intent of these laws is to give candidates with criminal histories a “clean slate” by providing automatic expungement of certain crimes when they’re eligible for it. 

Many states allow for sealing or expungement of records, but it can be difficult, time-consuming, and sometimes costly for individuals with an eligible record to navigate the legal process to get it cleared. Clean Slate laws are meant to automatically clear the record, eliminate barriers that limit or prohibit them from gaining employment, and get people to work.

What this means for employers:

Clean Slate laws open doors to available talent; employers should be aware the laws can change what will show up on a background check

Employers who hire in Clean Slate states need to understand the criteria of each law that applies in the jurisdictions where they hire – what types of records are being cleared, when they become eligible for clearance, and how it impacts their evaluation criteria as outlined in their organization’s background check policy. 

Since each law is different, employers will want to understand what types of records they no longer have access to (such as arrest records, misdemeanors, and in some cases felonies), what that means for their business, and whether those records are still relevant in states where no Clean Slate law is in effect. For businesses that hire in multiple states, employers may want to think about what records are relevant for candidates with similar convictions in states without a Clean Slate law.

Here’s why

If two candidates with the same criminal record (for example, a conviction for marijuana possession from four years ago) both apply for the same position and one candidate is in a state with a Clean Slate law and their record has been expunged, and one is in a state without a Clean Slate law, that candidate’s record will appear on a background check.

Depending on the employer’s screening criteria, the candidate with the criminal record may be ineligible for the job, while the other candidate would be eligible.
The underlying message behind growing Clean Slate laws is, let’s get people to work. It’s a step in the right direction to help justice-impacted individuals with employment opportunities. It’s also a message to employers – if it’s been a while since you reviewed your background check policy, it might be time to look for opportunities to update your eligibility criteria. Don’t miss out on great workers because of old ideas.
Su-Han Wang
Su-Han Wang
Managing Litigation & Compliance Counsel at Checkr

There will likely be delays or data limitations as states implement Clean Slate legislation

As states navigate the complexities of implementing new Clean Slate legislation, the impact on background checks has varied, as existing technology and resources influence the impact, and states operate independently of each other. For example, in 2023, Michigan’s implementation of their Clean Slate law caused several county courts in key jurisdictions to temporarily become inaccessible. For several weeks the criminal records in these counties were inaccessible for all background check providers, causing significant delays in processing of background check reports across the industry.

Positive and negative consequences of Clean Slate laws


Positive

    • Opens hiring funnel to eligible candidates

    • Requires less records to review and assess on background check reports

    • Eliminates potential bias or negative stigma associated with a record

    • Gets people to work

Negative

    • Implementation of law may cause delays in background check turnaround times, or limit access to data

Insight 3

Employers are not following basic compliance procedures

70% of our survey respondents stated that they don’t always follow the adverse action process when taking unfavorable action against a candidate. (When an employer decides not to move forward with an employment offer because of the results of the background check, they are required to follow the adverse action process.) A smaller percentage, 16%, said they were unsure their organization provides the necessary disclosure and authorization forms. These two steps – getting written consent and performing adverse action – are fundamental compliance obligations under the FCRA. 

Employers are under pressure to fill their open roles and fill them quickly. An ever-changing labor market over the last few years hasn’t helped either. When you’re in a crunch to just get people in the door to keep your business open and the lights on, it’s only natural to look for shortcuts to get there and skipping or short changing your background check process likely becomes an attractive option.
Allison Nadeau
VP, Global HRBP, iCIMS

Are organizations following the FCRA’s adverse action process?

Most agree they’re providing necessary disclosure and authorization forms

What this mean for employers:

Compliance errors expose employers to unnecessary legal liability

Employers are responsible for following certain procedures to conduct compliant background checks in accordance with the Fair Credit Reporting Act, the federal law that governs how companies order and consider information contained in consumer reports (including background checks). 

In organizations that make hundreds of hires each month, if one or more steps in the background check process violates the law, it could create hundreds (or thousands) of potential plaintiffs. Similarly, violations for only a handful of hires can cause serious harm to a small business with limited resources.

When the results of a background check may negatively affect employment, employers must follow the two-step adverse action process before making a final decision. The process is meant to give candidates an opportunity to review the background check report and respond to the employer’s decision. 

Creating a background check policy and training materials that clearly outline how and when to provide disclosure and authorization forms, and how to complete adverse action based on the requirements in jurisdictions where companies hire, helps ensure its screenings comply with FCRA requirements.

"Providing the proper consent and authorization forms for every candidate not only helps to mitigate risk but also makes it easier to be consistent when needing to perform adverse action. Adverse actions are often sensitive matters that require tact to manage effectively and legally. Having a defined process and the appropriate action notices helps to take the guessing out of these situations," said Allison Nadeau, VP, Global HRBP at iCIMS.

Insight 4

Half of employers are not confident they have screening procedures in place to prevent discrimination

Awareness of fair chance hiring practices to support justice-impacted individuals has increased thanks to the growing number of Ban the Box and Clean Slate laws being implemented across the country.

However, our survey reveals 62% of employers may be overlooking a key compliance step that’s also tied to fair hiring and designed to prevent discrimination:

Not following Equal Employment Opportunity Commission (EEOC) guidance to follow the “Green” factors, or “nature-time-nature” test, when conducting an individualized assessment during a hiring decision. The EEOC’s “nature-time-nature” test suggests employers consider the nature of the offense, the time that has passed since the conviction, and the relevance of the offense to the position.

Do organizations have policies and procedures in place to prevent discrimination?


Are organizations confident they’re conducting fair assessments using “nature-time-nature”?

EEOC’s 3 “Green” Factors to consider when conducting an individualized assessment

What this mean for employers:

Not following EEOC guidance can result in discrimination, violations of Title VII, and potential damages

Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against candidates on the basis of race, color, religion, sex, age, disability, genetic information, or national origin. According to EEOC guidance, blanket bans against hiring candidates with arrest or conviction records can violate the law if they disproportionately impact racial and ethnic minorities. 

Violations of Title VII can result in the employer being required to stop any discriminatory practices, take steps to prevent discrimination in the future, be required to pay compensatory damages to the victims, and in some cases pay punitive damages. In 2022, the EEOC recovered over $513 million for workers who faced discrimination.

Employers competing for high quality, high performing, and high potential candidates would be well served to include justice-impacted (those with a criminal history) people in their candidate pool, especially in cases where their criminal offense is irrelevant to the job. Justice-impacted employees are highly motivated to excel in the workplace and show higher retention rates compared to their non-justice impacted peers.
Robert Kaskel
Robert Kaskel
Chief People Officer, Checkr

Incorporating EEOC best practices can prevent discrimination and support DEI efforts

Conducting background checks based on the job role, creating detailed guidelines for adjudication (such as a position-specific matrix), and conducting individualized assessments on candidates with records that need further review helps adjudicators review charges consistently, without bias, and focus only on records that are related to the job. The EEOC recommends employers conduct the “nature-time-nature” test which considers the nature of the criminal offense, how long ago it occurred, and whether it’s relevant to the position in question. 

Implementing fair chance hiring strategies is one concrete, actionable step employers can take to mitigate risk around EEOC guidelines and federal anti-discrimination law, make their organization more equitable, and passively broaden and diversify the backgrounds of the individuals in their candidate pool.

“Fair chance hiring should be the base line of every organization’s DEI strategy because we are not practicing authentic inclusion in the workplace if we are wholesale excluding millions of qualified candidates who happen to have a previous arrest or conviction record,” said Ken Oliver, VP at Checkr.org.

Employers may overlook the need for conducting an individualized assessment of candidates with a criminal record because it increases the time to hire, but ensuring a fair and equitable hiring process should be the focus. When failing to adhere to anti-discrimination policies, companies miss out on incorporating the diverse perspectives of justice-impacted individuals into their business.
Alta Ray
Senior Employment Counsel, Greenhouse

Insight 5

Large companies more likely to have a dedicated team responsible for background checks, less likely to conduct training

Our survey data shows large businesses are more likely to have a dedicated background check team on staff in order to scale with the number of candidates they need to hire, screen, and onboard. 24% of survey respondents who work at large organizations said a dedicated team is responsible for background check compliance versus 42% of all survey respondents who said HR or onboarding teams manage the process.

Large organizations were the least likely to conduct comprehensive training on the importance of compliance and legal risks associated with background checks compared to other size organizations.

Percent with dedicated background check teams by organization size


Frequency of comprehensive training 


What this mean for employers:

A dedicated background check team can help large organizations scale a compliant screening program

Hiring at scale requires teams at large organizations to identify efficiencies that can help them move reports quickly through the screening process based on their adjudication criteria. This means large businesses often have more rigid rulesets around what types of criminal records are relevant and not relevant to their business, and specific procedures for how to carry out background check processes in all the regions they hire. A more consistent approach to decisioning and assessments can result in reduced potential for discrimination.

In addition to using an advanced decisioning tool to help create efficiencies, at Checkr, we’re seeing more large organizations form an adjudication panel to streamline the review process. Having a dedicated panel of employees conduct individualized assessments supports fair, consistent decision making across their candidate pool, and complies with the guidelines set forth in their background check policy.

Often, these panels consist of three to five senior-level employees from cross-functional teams, such as HR, legal, trust and safety, and compliance, whose job is to review records that potentially make a candidate ineligible. They may also rotate members in and out of the team reviewing these records regularly – for example, every quarter to six months – to further reduce potential for bias in the review and decisioning process.
Tyler Whalen
Principal Solutions Engineer at Checkr

Decisioning tools speed and simplify the background check review process

To understand how large businesses’ adjudication processes compare to those of small and mid-sized businesses, we analyzed Checkr report data by organization size and adjudication rates based on reports with a status of “review”, which means information appeared on the report that the company may want to review, and “clear” which means no record was reported or only records that the organization identified as not relevant.

While the percentage of candidate reports that may need review is similar across all three business segments, the percentage of reports with a status of “review” is highest for large businesses (5.8%). As large organizations scale their background check program for hundreds or thousands of candidates per month, not only will the percentage of candidates with a record increase due to the higher number of job openings, they often have more systems in place to improve efficiencies in their review processes. 

Percent of candidate reports with a status of “clear”

Percent of reports with a status of “review”

Percent of all reports for which adjudication was initiated

Median time (in hours) to make an adjudication decision

Data is based on all criminal searches run for Checkr’s Small, Mid-sized, and Large customer segments between August 2022 to August 2023.

Insight 6

Small businesses are least confident they’re compliant, and most concerned about Ban the Box

When analyzing our survey responses by organization size, we found small businesses in particular were lagging behind when it comes to foundational compliance processes. 55% of our small business survey respondents (1-100 employees) lacked confidence their background check policy complies with federal, state, and local screening laws and regulations, or they don’t have one – the largest percentage of all organization sizes.

Moreover, small business respondents ranked “fair chance hiring requirements” as their top concern when it comes to legislation and its impact on background screening. As our findings indicate, FCRA mandates and the multitude of state and local Ban the Box laws, coupled with recurring legislative updates, makes managing a compliant background check program challenging. 

For small businesses, it’s most often HR’s responsibility to ensure compliance. With small teams, resources are stretched thin and background checks may be one of a dozen other important responsibilities an HR professional manages throughout their week. If they don’t hire very often, they may only need to conduct background checks a few times a month.

Are small businesses confident their background check policy complies with federal, state, and local regulations?


Small businesses’ top concerns regarding state-, county-, or city-level legislation and impact on screening


Fair chance hiring requirements (Ban the Box laws)
Record clearance & expungement laws ("Clean Slate" laws)
Data redaction laws
Laws with conflicting requirements
Laws restricting use of credit checks
Marijuana legislation and drug testing laws

Compliance responsibilities overwhelming fall in the hands of HR/onboarding teams


What this means for employers:

Implementing screening guidelines, fair chance best practices, and regular training can help small businesses maintain compliance

Small businesses employ almost half (46%) of America's private sector workforce, according to the U.S. Chamber of Commerce, and going into 2024, the persistent labor shortage will continue to hit small businesses hardest. Since 81% of small businesses said they used background checks during the hiring process (1), it’s critical that employers follow all applicable regulations – not only to avoid penalties but also ensure they can meet the hiring needs of their business. 

As discussed earlier, a written background check policy, along with documented adjudication guidelines, is foundational to a compliant screening program. Without a clear set of parameters for team members to follow, inconsistencies in the report review and decision-making process could occur and that could lead to unintentional discrimination and risk of non-compliance with federal and local laws.

“Employers need to follow federal laws, such as those related to disclosure, authorization, and adverse action, as well as any state and local laws that may apply, which can also impact when they order and how they review a background check,” said Su-Han Wang, Managing Litigation and Compliance Counsel at Checkr.

Ban the Box laws mainly cover the public sector, but many laws also apply to private sector employers. In some jurisdictions with a Ban the Box law in place, not all employers are covered by the statute. For example, California’s Ban the Box law applies to employers with five or more employees, while Maryland’s applies to private employers with 15+ employees and public-sector employers for the State of Maryland. 

Employers will want to determine whether a Ban the Box law applies to their organization, find out when a background check can be conducted, which criminal records can be considered, what the adverse action requirements are and whether any specific waiting periods apply. 

Even if a Ban the Box law doesn’t apply, small businesses can open their doors to more available workers by applying fair chance hiring best practices anyway. By waiting to inquire about a candidate’s criminal history until after a conditional offer is made, for example, small businesses can evaluate candidates based on skills and qualifications first.

Implementing and maintaining compliance training programs can help ensure that employees involved in the background check process are following correct procedures as outlined in the company’s policy. Often, small businesses can take advantage of the compliance training and educational resources offered by their background check provider, if available. At Checkr, we see high rates of participation from this segment in our compliance webinar programs, and offer access to our free Checkr Academy, a comprehensive library of educational resources designed to educate about background check compliance and how to use the Checkr platform.

(1) Based on a Checkr survey of 1,000 American workers employed at small businesses (1-1,000 employees).

Ultimately, when small businesses fail to follow basic screening compliance processes, they lose out on both time and good candidates that could help take the business to the next level. Following the laws and regulations that are set up to protect employees really saves everyone time in the long run and helps the right people get into the right jobs quickly.
Anita Grantham
Head of Human Resources, BambooHR

Insight 7

With marijuana becoming legalized, employers are shifting their drug testing practices

Medicinal and/or recreational adult use marijuana is legal in 40 states plus Washington DC, and now six states, two cities and Washington DC have laws on the books specific to marijuana use and testing and how employers can use that information to make hiring decisions, making it difficult for employers to know how to manage drug testing compliantly.

Laws that include employee protections around testing for marijuana will continue to be enacted, and in many locations employers are discontinuing their screening for marijuana altogether.

Employer testing for THC is in decline

Checkr report data shows the percentage of drug test panels that include THC has declined significantly

The laws vary widely. Some prohibit employers from testing for marijuana altogether (with some exceptions), while others restrict when testing can be conducted, and still others restrict employers from making adverse employment decisions about candidates who use marijuana legally, including those that test positive for THC. (In most cases, certain safety-sensitive positions and workplace impairment are exempt from the scope of these laws.)

States passed laws to legalize marijuana use, but didn’t necessarily include considerations for how legal use of the substance would impact how employers consider positive results for THC on a drug test for hiring or retention. Now, we’re seeing states needing to play catch up so that their drug testing laws align with their marijuana legalization laws.
Jennifer Thibodeau
Jennifer Thibodeau
Head of Policy at Checkr

What this means for employers:

Employers need to rethink their drug screening policies to consider legal requirements, fairness, and safety concerns

More than ever, employers need to ensure their drug screening policies are up-to-date with local regulations, and follow specific adjudication guidelines outlined in the law to avoid discrimination claims and legal action. 

The underlying message of these measures is anti-discrimination. Employers will want to rethink how their drug testing policy fairly – or unfairly – treats candidates and employees in states where they can legally use the drug. Organizations who hire in multiple states, including those that hire for remote work positions, need to clearly outline in their policy where marijuana use is legal, whether testing is relevant to the job, and the implications and risks associated with an employee being under the influence on the job.

As marijuana legalization continues to spread, and marijuana use is more widely accepted, eliminating pre-employment marijuana screenings may help organizations compete more effectively for qualified candidates. If cannabis use is legal in the state and marijuana testing isn’t legally required for the jobs in question, employers may opt not to conduct marijuana testing. As always, careful consideration should be used, and in consultation with legal counsel.

Get more insights

Join our experts for a webinar to learn the Essentials of Background Check Compliance: 5 Best Practices for Every Business.

The takeaway

Our survey revealed uncertainty around screening compliance, as well as inconsistent policies that may expose employers to risk. But we’re also seeing positive steps in the right direction. Awareness of fair chance hiring practices is growing, and large organizations are taking steps to prioritize fairness and consistency in their adjudication processes. And despite complex, sometimes conflicting requirements, legislation designed to provide fair access to employment is bringing attention to important issues that impact hiring, such as bias and discrimination. 

With these insights in mind, employers can revisit their own background check policies and evaluate whether their approach to foundational compliance processes is on track, or putting them at risk.

Ready to learn more? Watch the on-demand webinar to get expert insights on how to level up your compliance program in 2024.

Survey methodology

1,000 American workers (who were not Checkr customers), ages 25+, involved in the background check process at their company participated in this study. An equal number of respondents was gathered from ten key industries including construction, healthcare, hospitality, HR/staffing, information services/data, manufacturing, personal services, retail, software, and transportation. 

Respondents were gathered from a variety of business sizes, and included 56% men and 44% women. The survey was administered over a 5-day span in August 2023 and consisted of 15 questions related to the background check and screening compliance processes. All participants in this study were screened to ensure their involvement in the background check process at their current organization.

Disclaimer

The resources and information provided here are for educational and informational purposes only and do not constitute legal advice. Always consult your own counsel for up-to-date legal advice and guidance related to your practices, needs, and compliance with applicable laws.

10 different industries


ConstructionHealthcareRetailSoftwareStaffing / HRInformation services/dataHospitalityPersonal servicesTransportationManufacturing

Businesses of all sizes


Additional resources