Background Checks
Manage your employment screening program easily and more efficiently with GoodHire’s award-winning advanced platform.
Access our full library of content to learn about hiring trends, screening compliance, and how GoodHire works.


5 Ways Background Checks Can Put Your Company At Risk

Illustration of a sailor in a paper boat and looking through a scope

Background screenings are supposed to protect your business, but they also come with risks of their own. Background checks that don’t comply with federal, state, and local laws and regulations can result in costly fines, settlements, and lawsuits for employers.

Here are five warning signs that your background check provider might be putting your company at risk.

Background check reports help employers mitigate the risk of a bad hire, but not without some risks of their own. Background checks are governed by a myriad of federal, state, and local laws and regulations. Failure to comply with these laws can result in costly fines, settlements, and lawsuits that can end up costing a company thousands, and sometimes millions of dollars. Employers have paid out $174 million to resolve class-action lawsuits related to federal violations alone, and many companies settle before they reach this point. 

If your background check provider is guilty of any of the following, it might be time to consider another:

1. Reporting Information Not Allowed In Your Jurisdiction

Fair hiring laws are becoming more robust, and employers may only use specific kinds of data to inform hiring decisions. For instance, ban-the-box laws in 36 states and more than 150 cities and counties restrict how companies can use criminal background checks as part of their hiring processes. Further, some background check providers report results employers aren’t legally allowed to use in their hiring decisions in some jurisdictions, such as criminal records that are more than seven or 10 years old, opening them up to hiring lawsuits.

Employers need to understand their background check provider’s level of compliance, and consider partnering with a provider that builds compliance into the background check process. This is particularly important for employers that hire across multiple states and cities. A compliance-focused background check provider can mitigate risk for companies by filtering out results employers can’t legally use to make hiring decisions.

2. Illegal Drug Screening

Drug screening has the potential to put employers at risk for discrimination lawsuits and non-compliance of state laws. There has been a big shift recently in medical and recreational marijuana laws. Some locations don’t allow employers to test for marijuana. Other states limit how pre-employment drug screening results can be used. For example, California allows a drug test only after the applicant has received an offer of employment conditioned on passing the test. Many small- and medium-sized companies don’t have access to a robust legal department that can stay on top of new drug screening legislation.

It’s helpful to partner with a background check provider that is knowledgeable in the drug screening landscape and stays up-to-date with new drug screening laws and developments. Your provider should offer drug screening packages that omit marijuana and THC from the screening panels in order to protect employers who are subject to marijuana regulations. A good provider will also use real-time conviction records so employers don’t see sealed, expunged, or retroactively dismissed marijuana convictions in jurisdictions where it’s prohibited.

3. Outdated Template Forms

One of the most common violations that lead to FCRA-related lawsuits is failure to provide compliant background check disclosure and authorization forms (collectively, also called a consent form). Disclosure and authorization forms are often provided to employers by background check providers, but if not kept up to date, may be non-compliant. 

For example, a 2019 ruling in Gilberg v. California Check Cashing Stores mandated that disclosure forms cannot include state law disclosures. Background check providers that don’t update their forms to reflect this are putting their customers at risk of a FCRA-related lawsuit. The FCRA holds employers liable, and an unintentional gap in compliance awareness doesn’t give you a free pass.

Employers can protect themselves by holding their background check provider accountable for providing up-to-date template forms. Ask them how they track the law around consent form compliance, how quickly they update forms when the law changes, and how they’re notifying customers of changes. Consent forms should be separate from job applications, and the language should be clear, in large print, and on its own form. Review consent forms with counsel, and be sure to find a compliance-minded provider as soon as possible if you think your current forms are outdated.

4. “One & Done” Background Checks

It’s common for employers to screen job candidates prior to hiring, and some employers screen employees again each year. But it’s no longer a best practice to only screen once per year in certain industries and positions. For example, industries that require home visits—including service workers or home healthcare providers—should screen employees more frequently so they don’t miss new infractions. The same goes for safety-sensitive positions, like drivers or heavy machinery operators. Failing to catch infractions in a timely manner could open employers up to negligent hiring claims. 

Employers can help keep their workplaces and customers safe by conducting ongoing continuous workforce monitoring throughout their employees’ tenure of employment. Partner with a background check provider that’s able to perform regular post-employment screening services. These will ensure you receive an alert if a new criminal record is found, so you can stay informed and mitigate the risk of negligent hiring lawsuits.

5. Inability To Filter Results Based On Your Company’s Background Check Policy

Candidates consent to a background check based on your written policy, which outlines the information that will be considered in your hiring decision. But your background check report may contain information that’s not addressed in your policy. Let’s say your policy states you will only consider violent felonies from the past seven years. One candidate’s background check report shows a non-violent offense from last year, and another shows a violent offense from 15 years ago. Without a filter in place, this additional information could lead to inconsistent screening practices, biased hiring decisions, and discrimination lawsuits. 

To help you make informed decisions and avoid scrutiny by the EEOC, use a background check provider that offers the ability to filter results to comply with your internal policy. This allows you to consistently apply your background screening policy to all candidates so you can avoid making arbitrary decisions that could be rooted in unconscious bias. If you conduct different screening searches for different roles, look for a provider that can customize bundles for each role.

Choose A Background Check Provider That Prioritizes Customers & Compliance 

Partnering with the right background check provider can help you navigate issues that have the potential to put your company at risk. Federal, state, and local laws are complex and are in constant flux. A strong background check provider will stay on top of new laws and rulings that could affect your company’s screening process, and guide you toward compliance. 

GoodHire Is A Leader In Compliance

talk to Sales
GoodHire follows FCRA, ban the box, and EEOC compliance laws

The resources provided here are for educational purposes only and do not constitute legal advice. We advise you to consult your own counsel if you have legal questions related to your specific practices and compliance with applicable laws.

About the Author

Jen Dewar

Jen Dewar is a marketing consultant in the HR technology space with a focus on developing educational content for HR professionals and recruiters. She is passionate about diversity and inclusion, lifelong learning and development, and treating people like people throughout the candidate and employee experiences.