In a survey of a random sample of its members, the Society for Human Resource Management (SHRM) found that the percentage of businesses conducting criminal or credit checks on new job applicants has decreased in recent years. Increased federal and state privacy protections for individuals may play a major role in this decline. Most employers who conduct criminal background checks do so when required by law for the specific job opening, or when specific job duties make the information relevant. Credit checks are common when the credit information is pertinent to the prospective job duties, and a check is not prohibited by law. This can create a tricky risk situation for employers, who must be aware of when a background check is required by law, and when the law prohibits it.
SHRM determined that slightly more than half of businesses do not conduct credit checks on job applicants. The rate the identified in 2010 was forty percent. Businesses listed prior work experience, specific job expertise, and being a “good fit” for the position and the business as significant factors they would consider before credit history. Eighty percent of businesses surveyed said that they have hired applicants with negative credit information. The two leading reasons why employers did perform credit checks was to guard against theft or embezzlement and to satisfy specific liability concerns. Credit checks are most likely to occur for jobs with significant financial responsibilities or access to confidential personal information, or for senior executive positions. Due to legal restrictions on access to and use of personal credit information, employers tend to limit credit checks to positions for which negative information would be highly relevant.
The federal Fair Credit Reporting Act (FCRA) requires an employer to provide a written disclosure to a job applicant of the employer’s intent to obtain credit information, as well as a description of the applicant’s consumer rights. The employer should obtain the applicant’s written consent, and should provide the applicant with a copy of the report. About two-thirds of businesses said they give applicants an opportunity to explain any negative information before making a final hiring decision.
The percentage of employers who do not conduct criminal background checks on job applicants rose from seven percent in 2010 to fourteen percent in 2012. As with credit checks, employers are limiting criminal background checks to jobs that require a higher degree of trust or responsibility. The two leading reasons employers gave for conducting criminal checks were to avoid “negligent hiring” liability and to ensure a safe workplace. Employers consider felony convictions, both violent and nonviolent, as a potential reason not to make an offer of employment, but more than half of employers surveyed said they allow applicants to explain their criminal history.
Employers must carefully consider what type of background checks, if any, to conduct on job applicants. Legal restrictions on access to personal information may put an employer at risk of liability to an applicant, while a lack of background information on a new hire may expose the employer to liability to other employees or customers. Prism Risk Management provides businesses and organizations with risk and loss prevention consulting and offers services in loss control planning. To learn how our team can help your organization, contact us today online or at (512) 901-0070.
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