Avoiding Common Employer Pitfalls: Background Checks in Hiring

Background checks are widely used by employers to verify candidate credentials, evaluate potential risks, and make well-informed hiring decisions. However, missteps—particularly those involving criminal or credit history—can create serious legal exposure. A range of federal, state, and local laws regulate how and when background information may be used, and noncompliance can result in costly claims or regulatory action.

Below are common pitfalls employers should avoid, along with strategies for staying compliant when using background checks during the hiring process.

1. Noncompliance with the Fair Credit Reporting Act (FCRA)

The FCRA imposes specific requirements on employers that use third-party background screening services. Common mistakes include:

• Failing to provide applicants with a stand-alone document explaining that a background check will be performed.
• Including unnecessary or legally problematic language in disclosure forms.
• Proceeding with a background check without obtaining proper written consent from the candidate.
• Taking adverse employment action without first providing the individual with a copy of the report, a notice of rights under the FCRA, and a pre-adverse action communication.

To reduce risk, employers should regularly audit their forms and procedures to confirm alignment with FCRA standards.

2. Relying on Broad Exclusions for Criminal History

Automatically disqualifying applicants with any criminal record can lead to liability under Title VII of the Civil Rights Act, as well as state fair employment laws. Such blanket policies may disproportionately impact certain demographic groups and are increasingly subject to scrutiny.

Instead, employers should evaluate each case on its merits by considering:

• The nature and seriousness of the offense;
• The time elapsed since the conviction or incident; and
• The relevance of the offense to the job in question.

In many jurisdictions, fair chance hiring laws limit when and how criminal history can be used, emphasizing the need for individualized review. Employers must review background check policies to ensure they are in compliance.

3. Ignoring State and Local Compliance Obligations

Beyond federal law, numerous jurisdictions have enacted legislation that governs the timing, content, and use of background checks in hiring. Key local requirements may include:

• Delaying inquiries into criminal history until after a conditional job offer is made;
• Restricting consideration of arrest records, sealed cases, or offenses that have been expunged; and
• Mandating notice and explanation before employment is denied based on a background report.
• Specific requirements for background check disclosures and consent forms.

Employers operating in multiple jurisdictions must adopt location-specific policies or centralized procedures that account for local legal variations.

4. Misuse of Credit Reports

While credit checks may be appropriate for roles with financial oversight, their use is limited by law in many areas. Several states prohibit credit history inquiries unless the employer can demonstrate a clear and specific job-related need.

Before requesting a credit report, employers should assess whether the position justifies such scrutiny and confirm that any request is legally permissible in the jurisdiction where the applicant resides or will work.

5. Inadequate Documentation and Safeguards

Poor recordkeeping can hinder an employer’s ability to defend against legal claims stemming from background check practices. To minimize this risk, employers should:

• Maintain copies of all relevant disclosures, authorizations, and adverse action communications.
• Document how hiring decisions are made, especially when based on criminal or credit history.
• Store sensitive information securely and limit access to those with a legitimate business need, in compliance with privacy laws.

Best Practices for Employers

• Use up-to-date and legally compliant FCRA and state/local disclosure and authorization forms.
• Implement robust procedures for complying with pre- and post-adverse action requirements.
• Perform individualized assessments when evaluating criminal records in compliance with applicable state and local laws.
• Stay current on applicable state and local background check laws.
• Provide training for HR and hiring staff on lawful screening practices.

Conclusion

When properly managed, background checks can help employers make safer, smarter hiring decisions. But to avoid exposure, employers must be vigilant in complying with a patchwork of federal, state, and local rules. By proactively reviewing background screening practices and tailoring policies to applicable legal standards, employers can mitigate risk and maintain a fair and compliant hiring process.

For guidance in reviewing your background check program or navigating compliance requirements, please reach out to Partner Tara Humma.

This summary is provided for informational purposes only and is not intended to constitute legal advice nor does it create an attorney-client relationship with Rimon, P.C. or its affiliates.

Tara Humma is a Litigation attorney who focuses her practice on labor and employment matters. Tara has over a decade of experience representing public and private employers of all sizes in states across the country. Tara represents clients in all phases of employment litigation, from initial pleadings, discovery, and motion practice to trial preparation and appeals. Her experience includes a broad range of litigation matters including, but not limited to, claims brought under Title VII of the Civil Rights Act, the Americans with Disabilities Act (ADA) (including accessibility cases), the Family and Medical Leave Act (FMLA), the Fair Labor Standards Act (FLSA), breach of contract cases related to employment contracts and restrictive covenants and various other state and federal employment laws. Read more here.