Pre-employment background screening has become a permanent part of many companies’ hiring process. According to the Society for Human Resource Management, eight out of 10 employers complete criminal background checks on job applicants. But if you’re going to run checks on potential or current employees, make sure you’re doing so lawfully, says D.S. Berenson, managing partner at Berenson LLP, in Great Falls, Va. Noncompliance with the federal Fair Credit Reporting Act (FCRA) could lead to a lawsuit from a job applicant.

The FCRA, which regulates the activities of consumer reporting agencies, employers, and others who use the reports, was modified in 1997 to increase the legal obligations of employers who use background checks.

Consumer reporting agencies — TransUnion, Experian, Equifax — provide two types of report: consumer reports (information from a variety of sources, credit reports, and criminal records) and investigative reports (based on interviews concerning a person’s character, general reputation, characteristics, and lifestyle). Berenson says most employers pull the consumer report; the investigative report is more often requested for executive positions. Employers can create an account with the credit reporting agencies to pull these reports, but most use an investigator or law firm.

Review the reports for felonies, sexual crimes, or crimes involving violence or drugs. Other things to look for include an uneven employment history or indications that the person lied about their education or past employers on the employment application. For applicants who will be involved in the company’s finances, you should also review credit history. “What you’re trying to do,” Berenson says, “is sanitize your risk.”

Full Disclosure

Remodelers must have the consent of the applicant for the background check with their signature on a form separate from the employment application. If the employer finds something, such as a felony, before making a hiring decision, he must provide the potential hire with a disclosure booklet that outlines his or her options, giving the applicant an opportunity to correct any misinformation. If the employer chooses not to hire the applicant based on something in the report, when they inform the person, they must again provide that same disclosure booklet.

Berenson says that if a company is working with a human resources firm, check that the firm is complying with FCRA rules. It’s a complicated process and is one that he guesses many remodelers are not following. “If you don’t do it right, you’re creating more liability for yourself,” Berenson warns.

Existing Employees and Trades

Employers can run background checks on existing employees, too. But, according to attorney D.S. Berenson, employers should address this ahead of time by defining the company’s background check policy in their employee handbook. This eliminates awkwardness when asking an employee to sign a consent form to allow a background check after they’ve been involved in an incident. Language about the possibility of doing a background check should also be in subcontractor agreements. —Nina Patel, senior editor,

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