Using Background Checks: What, How and Who?

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There is a wealth of information about people on the internet. But the temptation of searching on your own with instant access from “investigative agencies” can put you in danger of lawsuits. Here are some things to consider next time you want to do some research on potential hires or existing employees. 

What do you want to search for?

Make sure you have information on the right person. Investigative agencies can perform a search on a social security number that can identify what information belongs to the individual.

What can you search for on your own?

  • Employers/Employment History: Avoid calling just the human resources department; you will only get the standard information. In your employment application and also in the release form (see “How” below), you want the person to give the name of their direct supervisor and direct phone number.
  • Personal and Business References: Prepare your questions in advance to ask the direct supervisor and references about the abilities and performance that can impact your position.

What you want an agency to search for:

  • Federal, state and county records
  • Tracing the social security number to tie records to a specific person
  • Calling schools to verify education
  • Reporting on criminal records—this is critical. You can be sued for negligent hiring if you bring a person prone to violence (and other things) into the work place.
  • Possible credit history checks, but be careful on this. Legislation (including the Fair Credit Reporting Act) potentially limits the access of a person’s credit history. Plus, there are procedures to follow on requesting and evaluating credit history reports for hiring decisions.

Bottom Line: If you don’t need the information to determine a person’s ability and performance to do the job—don’t ask or search for it.

In the beginning of the interview process, ask some questions so that you can narrow your candidate choices and also find out more about the person. Balance how much time you want to spend meeting with candidates who may have derogatory information.


Before you start any searches or work with an investigative agency, inform and obtain written authorization from the applicant. The authorization should be on your employment application. You should give the applicant the option to designate any prior employers or references whom youcannot contact. You can and should ask questions why. Also use the investigative agency’s authorization forms and notify the candidate of what you are planning to investigate.

If you plan to investigate existing employees (because you did not do this before they were hired),you should have a policy in place that explains what and why, as well as consult with your experts (such as an attorney) to make sure your policy and actions will not violate local, state or federal laws.


Firms may have the requirement that their broker-dealer complete a background check on any new employees. If you complete some of the investigations yourself, you need to designate an appropriate employee who will handle this confidential information. Be careful on your selection.

Things to check for when selecting an agency for background checks:

  • Many background screening companies are members of trade associations—for example, the National Association of Professional Background Screeners—that provide information to their members and the public about the legal requirements of the screening process
  • Employers need to determine whether their screening firm provides FCRA-compliant searches for permissible employment purposes. Screening firms should follow all federal, state and local laws regarding employment screening. This factor should be the basis of due diligence and selection criteria for a reputable screening firm.

This article is for informative purposes only and is not to be construed as legal advice. Consult experts, such as an attorney, to be aware of federal, local and state regulations.

Mary Dunlap, CFP®
Mary Dunlap Consulting
Pottstown, Pa.

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