Pre-Employment Background Screening and Small Business

March 20th, 2012

If you own or manage a small business and don’t conduct pre-employment background checks of job applicants, you’re in the minority. You’re also at risk. Today, 80% of all human resource professionals use some form of pre-employment screening. A growing number of small businesses are following suit as well, simply because it makes good business sense, particularly during these tough and turbulent economic times.

There are a number of important reasons why pre-employment background checks are important. Probably the most critical reason is that because about 10% of the job applicants you interview have criminal records, a pre-employment screening can preempt dangerous, potentially violent incidents in your business.

Second, studies have shown that about 40% of every resume you review contains material lies or omissions about the applicant’s work and personal history such as education, past employment or overall qualifications. Furthermore, if a person is inclined to lie on their resume, simple reference checking won’t identify the problem. A job applicant who has no compunction about professional dishonesty will make sure that any references listed will give a glowing report, most of which will be bogus as well.

The bottom line—literally—is that thorough pre-employment screening is a good investment because the process will ultimately serve to reduce overall costs. Lawsuits stemming from employee actions, theft or embezzlement, high turnover, bad publicity, and lost customers become very expensive very quickly. Pre-employment screening is sound business investment that makes perfect business sense.

By now it should be pretty clear that the issue isn’t whether or not to conduct pre-employment screening—it’s something that every business, large or small, needs to do. The real issue is how to do it.

Many small companies—even some larger ones, for that matter—rely solely on Internet-based background checking services. Some businesses add a credit check as well, for good measure. Unfortunately, this approach leaves a lot to be desired, and if not executed properly—within the letter of the law—can create an entirely new set of problems.

The fact is that there are many different kinds of pre-employment screens that can be conducted. Basic employment screens would include SSN verification and trace, a criminal records search, driving records, employment verification, and perhaps a drug test. Expanded pre-employment screening would typically include a civil records search, education verification, and a thorough, professionally conducted reference check. For highly specialized employment, an international criminal check would be conducted, along with a review of bankruptcy records, professional licensing, Inspector General reports and a credit check.

If it starts to sound a little bit complex, it is. Determining what pre-employment screens to conduct, and then actually performing them requires a high level of professional expertise. A basic scan using an online service is of little or no use, particularly if you are not trained or experienced at deciphering the data you receive.

But there is another reason why pre-employment screening is best left to the professionals as well—potential legal liability. Unless you know the laws regarding pre-employment screening and follow them explicitly, you put yourself at risk for extensive legal—and financial—liability.

The Fair Credit Reporting Act (FCRA) is the main statute that governs pre-employment screening. For example, the FCRA requires that prospective and active employees must expressly authorize a pre-employment screen, and that they must be given notice before any derogatory information is used against them. Furthermore, the pre-employment screening report may only be used for a permissible purpose.

The Equal Employment Opportunity Commission (EEOC) is the federal agency that also has had its eye on pre-employment screening as of late. The EEOC has set forth laws that provide very specific guidelines as to how pre-employment screening data is used, and under what circumstances it can be obtained. In addition, there are a myriad of individual state laws that govern the pre-employment screening process as well.

Another thing to consider is that a pre-employment background screening report is only the first step in the process. It is now considered a human resources best practice to conduct periodic background checks on employees who are already working for the company. The reason of course is that people change over time and knowing that a background screen can be conducted at any time simply serves to keep honest people honest.

There is no question that pre-employment screening and ongoing background checking should be an integral part of your hiring and employee management process. Think of it as a sort of insurance policy—making a nominal investment up front and spending a little bit more along the way can avert huge losses and catastrophic events down the road.

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