Background Checks
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What To Do When Your Candidate Fails A Background Check

Person holding an alert sign in front of his face.

There are many reasons a job candidate might fail a background check, some more problematic than others. If the candidate failed a background check after a job offer, it doesn’t necessarily mean you shouldn’t hire them.

Following these five steps will help you make an informed decision while following your company’s hiring guidelines and all applicable laws.

You think you’ve finally found the perfect person for the job. Until, that is, negative results of the background check come through. When an otherwise excellent candidate fails that check, an important decision is ahead: accept or reject the applicant. 

Understanding why the person didn’t pass the background check helps you make an informed decision and ultimately leads you to the best solution for your company. Employment screenings can help protect you against everything from unexpected performance problems to risky on-the-job behavior. 

However, a “failed” background check, or an alert on the results, doesn’t necessarily mean you shouldn’t hire the candidate. When you implement the right strategies, under some circumstances, you can confidently proceed with the offer. 

In this article, we’ll cover the most common reasons a person may fail a background check. You’ll need to act compliantly, stick to your company policy, abide by federal as well as local laws, and follow essential procedures.

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What Are The Reasons For A Failed Background Check?

What causes a red flag on a background check? There are plenty of reasons a person may not pass a background check, including criminal history, education discrepancies, poor credit history, damaged driving record, false employment history, and a failed drug test. We explore each of these reasons here—some are definitely more problematic than others.

Criminal History

Roughly 77 million Americans have a criminal record that must be reported as part of an employment background check, according to the National Conference of State Legislators. Whether you can hire the person despite his or her record depends on several factors, including industry-specific regulations as well as the position he or she is seeking. Under certain circumstances, denying a job to an individual with a criminal history may be considered discriminatory. 

Education Discrepancies 

When a person is struggling to secure employment, the desire to fluff a resume can be intense. An education verification background check can identify claims that don’t match up with reality, including a job applicant’s higher education history. If the candidate didn’t attend a specific college or obtain a degree or certificate as maintained, you’ll want to discuss the discrepancy.   

Poor Credit History 

Not all background checks include a credit review, and some jurisdictions greatly restrict them. If you’re allowed to pull the reports, though, and spot high debt, a slew of delinquencies, and collection accounts, you may be concerned about the applicant’s integrity and financial responsibility, particularly for candidates applying for management or finance positions.

Damaged Driving Record

A motor vehicle report (MVR) may turn up speeding tickets or other moving violations. When driving is part of the position’s duties, this will be a serious matter. Checking a candidate’s driving record may help you avoid any legal and insurance consequences that can arise if the employee were to get into an accident while on the clock or behind the wheel of a company-owned vehicle. 

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False Employment History

One in three Americans aren’t honest about their work experience and dates of employment, according to a 2019 GoBanking Rates poll. One of the reasons you wanted the person to come on board may be that work experience. A history of doing the same or similar job at a different company for a certain number of years is attractive, so when you discover that the person wasn’t exactly truthful on the resume, you have sound reason to deny employment.

Failed Drug Test

Illicit drug use by employees can be a major liability. If the results of a pre-employment drug test indicate that the person has used an illegal substance, this could be grounds for excusing him or her from the pool of prospective employees. Screening policies ensure consistency across all new hires, so if the candidate fails the drug test and hiring is contingent on passing, that person may be out of the running. For candidates using marijuana for medicinal purposes, be sure to discuss with your legal counsel before taking adverse action on the basis of a failed drug test.

What Do You Do When Your Candidate Failed Their Background Check?

When reviewing a candidate’s background check results to make an informed decision about whether to hire, it’s important to follow the law. Review your company’s employment screening policy, as well as the Equal Employment Opportunity Commission’s (EEOC) guidelines, and follow adverse action steps as per the federal Fair Credit Reporting Act (FCRA) and local fair chance hiring laws, such as ban-the-box laws, that may apply.

In the event the person failed the background check after job offer, follow these five steps for an approach that is systematic, clear, and legal: 

Step 1: Consult Your Policy 

Your employment screening policy should outline everything that goes into a background check, including Social Security Number verification, past employment and education verification, reference checks, criminal history, motor vehicle records, and (where permitted) credit history. You will need to adhere to those terms carefully and equally with each candidate. 

Step 2: Send A Pre-Adverse Action Notice

If you’re considering not hiring the applicant based on the results of the screening, you’ll need to let that person know with a pre-adverse action notice, along with a copy of the background check and a copy of “A Summary of Your Rights Under FCRA”. (Download templates and forms here.) This gives the candidate the chance to review results for accuracy and respond to any of your questions regarding the information discovered from the report. 

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Step 3: Allow Your Candidate To Respond

This is when you give the applicant the opportunity to discuss the issues that the background screening brought to light (five to 10 business days, depending on your jurisdiction). For example, it’s entirely possible that the candidate had been a victim of identity theft and thus has a damaged credit history. Or the person has a valid explanation for an employment history discrepancy. You’ll only know when the person tells you. 

Step 4: Make A Decision 

As long as you stick to your company’s policy as well as employment guidelines set out by the EEOC to conduct individualized assessments, you’re ready to hire the candidate or not. If you do offer the person the position, you’ve completed the initial background check process. 

Step 5: Send An Adverse Action Notice 

If you decide to not hire the person because of what you discovered, federal law mandates that you send a final adverse action letter to the person (some refer to it incorrectly as a “failed background check letter”). In it you will explain that the findings of the background check are your reasons for the rejection. It is extremely important that you stick to the letter of the law, especially when the screening pulls up a record of criminal history, as it will help mitigate risk of potential fines and legal action against your company. 

Bad News, Good Solution

A comprehensive employee background check helps you make informed decisions. While the check may reveal negative items that raise red flags, those issues don’t always demand an immediate hard pass. Base your decisions using accurate data and reliable information; conducting targeted screens and individualized assessments; and encouraging open and honest dialogue with your candidates. 

Background checks are indeed vital to hiring high-quality candidates, but the process of getting everything in order can be difficult. It must be done compliantly and systematically, from when to start the check and get consent, to understanding what’s legal and what’s not, and then to effectively manage the final decision. This is not the time for errors, and you should take care to document the process throughout. 

To help, GoodHire offers built-in tools and capabilities to help you manage employment screening easily from start to finish. Every check includes online digital consent; an integrated adverse action flow that accounts for federal, state, and local laws for both your and the candidate’s locations; and tools for individualized assessments. Because these are inherently complicated matters, it’s crucial that you comply with your own policy as well as local and federal restrictions. GoodHire is designed to do just that, which makes your job of hiring a qualified candidate easier—and can make a hopeful job applicant who may not have a clear background check very happy. 

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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

As GoodHire’s managing editor, Sara Korolevich produces educational resources for employers on a variety of employment screening topics, including compliance and screening best practices, and writes about GoodHire’s company and product news. Sara’s experience stems from 20+ years working as a B2C and B2B PR and communications professional.