Is This Your Situation: Performing Background Checks for Small Businesses

Is This Your Situation: Performing Background Checks for Small Businesses

With the average cost per hire in the United States hovering over $3,000, making a hiring mistake can be an expensive proposition for a small to midsize firm. One way that your company can lessen the chances of making bad hiring decisions is to conduct basic background checks on prospective employees. You don't need to hire an expensive outsourced firm to make these checks. There are some steps you can take on your own to legally and ethically check into a candidate's resume and claims.

Background Check Basics

Just like job interviews, there are laws pertaining to background checks. Some types of background checks, such as checking on an applicant's credit rating, must be completed by a third-party firm, according to the Federal Fair Credit Reporting Act. You or someone else working for you can take the following steps to check into a candidate's background on your own:

  1. Verify employment history: You can call each employer listed on the resume and verify the facts of employment, such as the job titles and dates of employment included on a resume.
  2. Degrees earned: You can call the office of the colleges and universities listed on a resume and verify the degrees earned. Keep in mind that names may change over time due to marriage or divorce; you may wish to double-check with the applicant to ensure you have the correct name on file for the time period when the person attended college.
  3. Search online: Social media opens up new avenues for small-business owners to conduct background checks. Professional websites such as LinkedIn list resume sections that you can cross-check against the resume that an applicant sends to you. If there are discrepancies, that may be a red flag. A quick Internet search on a candidate's name may reveal mentions of the person in trade publications, local newspapers or on social media sites.

What Can't You Check?

Just as you can't ask candidates whether they're married or single, pregnant during an interview, you cannot check on certain life events or facts. Some of these may be accessible to a third-party information verification or background-checking firm, but you may need written consent to run such a background check. Always consult an attorney who is well-versed in human resources law before doing anything more than making cursory phone calls or conducting online searches on a candidate.

  • Credit ratings: Unless you're using a third-party background-checking service, you can't run someone else's credit report. Using a credit score to assess an applicant's character is also seen as a rather old-fashioned method of checking someone's background. Many life events can affect credit scores, and it's often not a good reflection of someone's character or competency. Unless you are hiring for a financial position, you can probably skip such a check.
  • Grades in school: You cannot access someone's college transcript without his or her written permission. You can verify that the person earned a specific degree, but not the courses taken or the grades earned.
  • Criminal records: Many records are private. Consult an attorney before conducting any criminal background checks.
  • Medical records: These are off-limits and cannot be checked. 

Hiring the right candidate takes time. Although it's tempting to skip background checks, a few phone calls and Web searches are all it takes to verify that what you're reading on a resume is fact, not fiction.


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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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