Print Print

Checking the background of new hires

Background checks for new hires

By Jonathan Cook, Senior II, Tax Services

In 2016, a monthly average of 178,000 employees was added to employers’ payrolls in the United States, according to an Employment Situation Summary released by the U.S. Bureau of Labor Statistics. Further, significant averages of new hires per month are projected to continue this year.

When hiring, background checks help ensure that your business is bringing in good people who can be trusted with sensitive customer information – and with your inventory. Background checks are a proactive solution to problems such as negligence with customer data and employee theft.


Laws on the books

To avoid legal issues, background checks must be performed in strict adherence to privacy rights and laws, which vary from state to state and evolve frequently. With this in mind, it is wise to consult with your attorney regarding the current best practice regarding background checks.

One privacy law to be aware of is the Fair Credit Reporting Act, which defines the standards for credit check use when performing a background check. Before requesting a credit (or consumer) report, you must:

  • Disclose clearly and conspicuously to the potential or current employee, in a standalone document, that you are requesting a credit report
  • Obtain the potential or current employee’s written consent

In many states, only law enforcement agencies, financial institutions, debt collectors, insurance companies and sureties can check credit reports. However, as with many laws, there are limited exceptions. The Electronic Communications Privacy Act gives permission for other types of employers to request a credit report if there is a “bona fide occupational requirement” of a particular position or group of employees. The limited exception is granted to careers that involve:

  • Access to personal, financial, or confidential information, trade secrets, or national and/or state security information
  • Unsupervised access to cash or certain assets valued at $2,500 or more
  • Bonding or security required by state or federal law
  • Signatory power over business assets of $100 or more per transaction
  • Managerial duties that involve setting the direction or control of the business

Other regulations

The Driver’s Privacy Protection Act regulates how sensitive taxpayer information from state motor vehicle department records can be released and shared. However, the departments generally will make the job candidate’s driving records available, usually for a small fee.

Unfortunately, little to no information can be easily gleaned from most schools, colleges, and universities, as they won’t release records without consent from the student. Further, some schools won’t release records to anyone but the student.

You also may need the candidate’s consent before performing a criminal background check. In general, it’s illegal to inquire about arrests – you can inquire only about convictions.



As an employer, you may personally conduct a background check, and free general advice on how to do so is available from the Small Business Administration and other organizations. Nonetheless, the more thorough and convenient approach is generally to hire an outside agency that specializes in performing background checks, such as a private investigator, background check specialist, or credit agency.

Take care when selecting a background check provider. Many internet-based start-ups offer lower prices, but this may be because the firm is less experienced or thorough than other providers. That firm may, for example, perform a criminal history search in only the states in which a candidate has lived. While it goes without saying, you get what you pay for.

Also be wary of instant background checks, as there isn’t a single national database containing all federal and state convictions. Finding criminal records can be a fragmented task, spanning multiple jurisdictions and courts. Moreover, many internet-based start-ups offer low rates for public record searches, while the fine print may detail how the special low rate is per jurisdiction, which will quickly increase the cost of a thorough check.


Only one piece of the puzzle

While checking the background of candidate’s is a vital part of hiring the best people, it should not be the only part. However, it is a critical one that must be approached with the utmost care and delicacy.

Seek the services of a legal or tax adviser before implementing any ideas contained in this blog. To reach a financial advisor at Lane Gorman Trubitt LLC, call (214) 871-7500 or email

Jonathan Cook

Jonathan Cook