What do you think of when you hear “background check?” You might imagine a private investigator who takes pictures of the subject shaking hands with a wealthy businessman and exchanging weighty briefcases in the Bahamas.
In fact, the everyday background checks are far less adrenaline-inducing than you may think. Background checks are essentially a deep dive into an employee-to-be’s commercial, criminal, financial, or professional records. These records could include:
- Criminal history
- Credit history
- Sexual offender status
- Driving history
- Education history
- Professional licenses
Employers usually perform background checks to ensure a qualified and trustworthy staff and to protect themselves from potential liabilities. This can be important in startups where one person can significantly affect the team dynamic and where everything is based on trust. More generally, can you imagine the damage a truck driver convicted of drunk driving or a non-board certified “doctor” could do? For the employer, it is legal to require a background check prior to employment and considering the importance of each new hire, it is something to seriously assess.
However, there are federal and state laws that protect the applicant as well. For example, you must ask for and receive written consent from the applicant agreeing to a background check. Federal law prohibits race, national origin, color, sex, religion, disability, genetic information, or age from being used as a basis for disqualification, and background checks mustn't be used to subvert that law, which is enforced by the Equal Employment Opportunity Commission (EEOC). Determinations on who is required to undergo a background check and how the results impact hiring decisions must not vary based on any of those protected factors.
Ultimately, it is up to you to decide whether and how to use a background check within the legal boundaries (i.e., you may choose to disregard certain types of results while emphasizing others). However, before declining to hire someone based on the findings of a background check, you are required by the Fair Credit Reporting Act to give the applicant a copy of the background check report and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act," which your background check service provider should have given to you. This is to provide an opportunity for the candidate to dispute or explain any information that came up.
If you decide to not hire even after this, you must inform the applicant that:
- They were rejected due to information from the report;
- The background check service provider can be contacted directly (and provide the contact information);
- You, the employer, not the background check service provider, made the hiring decision; and
- They have the “right to dispute the accuracy or completeness of the report, and to get an additional free report.”
There may also be additional obligations under the laws of the state where the applicant lives, so don’t forget to check those before proceeding.
As we hope this post illustrates, background checks can be an involved but important process. In the startup environment, your people are your biggest asset. Hiring decisions should be taken seriously, and this is one aspect of that! If you want to learn more about the other rules, check out the joint publication by those who actually enforce these laws, the Equal Employment Opportunity Commission and the Federal Trade Commission.
Once you do find the right candidate, Fidelity can help you create, send, and sign offer letters, create and manage custom onboarding workflows, manage Forms I-9 and Forms W-4, and even grant equity. Find out more about Fidelity!
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
Sample scenarios are for illustrative purposes only
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