Conducting Background Investigations and Reference Checks

What is the difference between a background check and a reference check?

A background check typically involves verifying a person’s criminal history, education, employment history, credit reports, and other public records. It’s a comprehensive review to ensure the accuracy of an individual’s stated history and to uncover any potential issues. In contrast, a reference check focuses on gathering information about a person’s character, work ethic, and performance from previous employers or professional contacts. This is usually done through direct communication with the references provided by the individual.

Both reference and background checks assist employers in learning about candidates. Background checks verify an employee’s data, history, and information. In contrast, reference checks focus on employer needs, providing a detailed look at a candidate’s fit and compatibility within the organization. In summary, a background check looks at objective facts about a person’s history, while a reference check gathers subjective opinions about their work and behavior.

Why Conduct Background Checks?

The best way an employer can discover the suitability of an applicant is by conducting reference checks and background investigations. A background check will let an employer know if the applicant has a poor credit history, criminal convictions, if their work and education history is correct, and if they have any motor vehicle violations. Reference checks are done by contacting former managers, educators, or co-workers to verify their skill, employment history, and character.

HR.com reported in 2018 that 95% of employers surveyed conducted conduct background checks. Many of those conducted random background checks throughout the course of employment and during recruitment.

Here are the top reasons to conduct a background check before hiring an applicant.

Safety

The top reason to conduct a background check on potential new hires is to maintain a safe workplace. Not only does a background check protect your employees and supervisors, but it protects your company from liability. A background check protects:

• Your employees from workplace violence or sexual harassment
• Your customers
• The public from an employee’s negligent driving
• Your business from reputation damage or financial loss

Negligent hiring practices can leave your company liable for legal action; background checks will show your company took due care.

Productivity

By checking a potential employee’s references, you can get an idea of whether they will be a productive employee or not. Their past performance is a good indication of how they will perform in your company.

Verifying Work and Education History

It is important to check that the applicant is representing themself truthfully. A HireRight survey in 2018 showed that 85% of the surveyed employers found a lie on a candidate’s job application when they checked references. Reference checks are quick and easy but can ensure you hire the right fit the first time.

What Are the Legal Challenges of Background Investigations

A number of laws concern the hiring process, and some even explicitly apply to background investigations. Here are some laws employers should keep in mind.

Federal Law

There are numerous federal laws that apply to background checks:

• Fair Credit Reporting Act – The FCRA requires proper handling of investigative consumer reports run by third parties. Usually these reports include credit checks, character references, and criminal record checks. The candidate must be notified and agree to the check and the type of information being checked.
• Fair and Accurate Credit Transactions Act – The FACT Act governs how to securely dispose of information found in investigative consumer reporting.
• EEO Laws – All background checks need to comply with EEO laws and must not unintentionally discriminate against protected groups.
• Immigration Reform and Control Act of 1986 – Aside from undocumented immigrants, Employers cannot discriminate against citizenship status or national origin.

State Law

Most states have laws regulating background investigations which impose additional requirements to some of the following things:

• Retaining records
• Safeguarding information
• Checking criminal records
• Controlling illegal immigration
• Obtaining consumer credit reports

Check your state laws to ensure you comply with any additional regulations. See California’s fingerprint background check, background check search website, background check process, and Criminal History Background Check Requirement.

Common Law

If a background investigation and the information it uncovers is not handled correctly, you can leave yourself open to common law claims. These include:

• Invasion of privacy
• Tortious interference with present employment
• Defamation
• Tortious interference with future employment
• Negligent hiring

Some of the states provide some immunity to people providing references, but you should check your state laws before agreeing to provide a reference.

Types of Background Investigations and Reference Checks

Employers have many types of background checks at their disposal. Depending on their needs, they might choose to run some but not others. Here we will cover the most common types of background checks.

Employment History

Many workers will give false or embellished employment histories on their resumes. Sometimes they even embellish their duties or skills to make themselves a better candidate for the new role. When conducting an employment history check, a potential employer will contact previous employers to verify:

• Job title
• Dates of employment
• Reasons for separation
• Duties performed

Education History

Misrepresenting or giving false education history is the second most common form of resume embellishing. There have been a number of high profile cases where CEOS and other high-level executives have claimed to have degrees they don’t actually possess. No matter the type of role you are hiring for, check the education history.

Criminal History

A criminal history check is one of the most important ways you can protect your business from negligent hiring claims. It helps uncover any potential for fraud, theft, sexual harassment, or workplace violence before you hire an applicant. Some businesses will conduct random criminal history checks on employees, or perform the check before promotions, changes of contract, or transfer.

The EEO has guidelines relating to criminal history checks and how HR managers can ensure that the checks do not exclude protected persons.

Most businesses will use a third-party supplier for their criminal history checks as they can be time-consuming and require some skill. Choose the provider wisely to ensure they are legally compliant.

Consumer Credit Reports

When hiring for a role which requires financial responsibility, many employers will conduct credit checks. This ensures an applicant’s financial position does not pose a risk of fraud or theft or that the applicant may be bribed or otherwise swayed when exercising financial discretion. Many laws prohibit unnecessary credit checks, so only conduct one if you have a compelling business reason for it.

Vehicle Records

If the role includes the use of a company car or any other vehicle for business purposes, then the employer should check driving records. By ensuring employees have a clean driving record, the business protects itself from liability if the employee is involved in an accident. These include:

• License status
• Suspensions or license cancellations
• Traffic violations
• Convictions and arrests for DUIs

Specific Industry Mandates

Some industries may require additional background checks such as in child care, public transport, education, and health care. Check with a lawyer for your state’s compliance guidelines.

National Security

If an employer finds any match with the Specially Designated Nationals, then they should report it to the Office of Foreign Assets Control. First, speak with an attorney to discuss your obligations.

Social Media

By checking the social media of an individual, you can gain a lot of information about any potential risks an employee may pose. For example, you can discover if they have blasted potential employers or shared confidential information. You can also discover if they post hate speech and therefore are a risk for discrimination in the workplace. Free, publicly available information like this could leave your business liable if there is an issue in the future. However, the information must not be used to discriminate against an applicant.

Personal References

A personal reference is very difficult to obtain because many companies wish to protect themselves from legal action if they give a former employee a bad reference. However, if conducted properly, they can give you valuable information about how the applicant is likely to perform and if they will be a good fit for your company culture.

How Long Do Background Checks Take?

Background Investigations usually take up to 48 hours, but some types of checks may take longer. If you are using a third party to conduct the background checks, they can give you a timeframe. It is up to you whether you give applicants an offer “pending background investigation” or if you conduct the check post-interview and pre-offer. It will all depend on how many final candidates you have for the role.

How Are Background Investigations Evolving?

As society changes, the methods and practices of background checks are also changing.

Automation

Many employers are using automated screening processes to conduct quick background checks. Instead of calling previous employers to get references, companies are using confidential and secure online portals to record references. From there, an HR representative can ask follow up questions if required.

Screening Contingent Workforce

Most US employers hire temporary workers, freelancers, or independent contractors to complete work as necessary. These workers can still pose liability issues with the company, so most employers are conducting screening on these workers too.