Employee Background Checks and Legal Considerations

Get Started

Employee Background Checks and Legal Considerations

Negligent Hiring

The term negligent hiring normally refers to an employer’s obligation not to hire an applicant that they knew or should have known was likely to undertake improper or dangerous conduct against other indivduals, or otherwise subject employees or third parties to actions which can create legal liability. These are important aspects of Legal Considerations for background checks.

Negligent hiring and retention lawsuits have found employers responsible for their employees’ actions, and employers can even be found liable for criminal actions that arise when the employee is not working.

By conducting a proper employee background check on your perspective employees, you can decide if the applicant is no only suitable for the position in question, but also whether or not they will be reliable and productive additions to your workforce.

Beyond the Legal Considerations for background checks of negligent hiring, you will likely find that applicants who are turned down or have offers rescinded as a results of a background check may be resentful.

To help you and the applicant understand to process completely, legal consideration and set reasonable expectations about the process and potential outcomes, the following specific procedures are required:

  • The applicant or employee MUST sign a release authorizing you and your agent (the background screening company) to obtain a background check used for evaluating the applicant for hire or promotion/transfer. The authorization must be in a separated document, not part another document, or form.
  • You should also be aware that the employee or applicant is entitled to receive a copy of the background check report. They can question the information contained in the report and ask where the information was derived from.
  • There are limitations on what types of information you can consider when making a hiring decision. Prior workers compensation claims, health information and lifestyle information should no and often cannot be used when making a hiring decision.

Background Check Reports or “Consumer Reports”

Employee background check reports, also known as “consumer reports”, may contain information that contradicts the information presented by the applicant or negative information the applicant failed to disclose. Sometimes the discrepancies are minor, like the dates of employment that are off by a few days. Other times, they are serious, like an undisclosed criminal conviction.

Faced with discrepancy, the employer must determine its importance and whether it impacts the hiring or promotion decision. The applicant/ employee may have a sound reason for the discrepancy.

If the employer decides to take, “adverse action” such as denying an applicant, there are two additional steps that should be taken.

The first step is to examine the employee background check against other background checks, and hiring decisions, to evaluate whether the criteria being used results in a “disparate impact” against groups protected under state or federal civil right laws.

The second step is to give the applicant or employee a pre-adverse action disclosure that includes a copy of the individual’s background check and a copy of “A Summary of Your Right Under the Fair Credit Reporting Act”, a document prescribed by the Federal Trade Commission. The “pre-adverse action” disclosure gives the applicant a chance to review the information any point out any errors, they need to be corrected and the applicant reconsidered.

If, after following the steps above, an employer takes adverse action against an applicant or employee, the individual must be given an adverse action notice, orally, in writing, or electronically, which must include:

  • The name, address and phone number of the consumer reporting agency (CRA) that supplied the report;
  • A statement that the CRA supplying the report did not make the decision to take the adverse actions and cannot give specific reasons for it; and
  • A notice of the individual’s right to dispute the accuracy or completeness of any information the agency furnished, and his or her right to an additional free consumer report from the agency upon request within 60 days.

When the employer performs what he or she calls a background check or an employment screening, this may or may not be subject to the two laws we discuss here:

Whether you are researching the topic for the first time or are a seasoned employer, it helps to know the language.

Consumer Report

This is the term used in the federal FCRA for any “written, oral, or other communication”, in other words, a report made about a person by a consumer reporting agency that bears on the person’s “credit standing, credit capacity, characteristics, or mode of living.” This includes credit reports (also sometimes called “interview” reports) made, among other things, for the employment purposes of hiring promotion, reassignment, or retention.

Investigative Consumer Report

Under the federal FCRA this means a report about a consumer’s character, general reputation, person characteristics, or mode of living in which information is obtained through interviews with neighbors, friends, or associates. Under the California’s Investigative consumer report is a report in which the same types of information are obtained through any mean. The term in California excludes credit reports.


The above information is for general interest purposes and is not legal advice. The reader should not rely on any of the above information for legal consideration & decision making purposes and should consult an attorney before taking any action based upon the information presented on this website.