Pre-Employment Background Checks

by Ryan


Pre-Employment Background Checks

A Small Business Owner’s Guide: Pre-Employment Background Checks | Part Four

Now that you’ve learned about required employee benefits, it’s time to move onto the appropriate and lawful background checks of your potential employee. 

Depending on the industry you’re in, you may require different background checks, including credit reports, criminal records, a lie detector test, medical records,
military service, workers compensation records, school records and bankruptcy information.

Credit reports

Although it isn’t common to obtain a potential employee’s credit report, you may decide to do so if you’re curious about a person’s trustworthiness or if you’re concerned an employee might have a need to embezzle money out of your business.

You will see the person’s credit report, not their credit score, meaning that you won’t see the three-digit number that lenders look at to decide if they are a sound loan to make. You’ll see if the person has made late payments, if they have missed payments, or if they have been sent to collections.

You can only check a person’s credit if he or she gives you written consent. If you decide not to hire someone based on his or her credit report, you are required by law to give the person a copy of the report. The person does have the right to challenge your decision with the FTC’s Bureau of Consumer Protection.

Criminal records

Doing a background check is a good idea in many cases, especially if you have many applicants that you don’t know personally. Asking for certain information, such as a criminal record, can seem intrusive, but a truly interested party will understand that you have your business’s best interest at heart.

In most states, a record of arrest can be reported for 7 years, but an actual conviction can show up on a person’s criminal record indeterminately.

Each state is different, so you will have to check the standards in your business’s state. California, for example, has the strictest laws. There, records of arrests cannot be reported unless the person was actually convicted.

You can find criminal record information through the FBI’s National Crime Information Center, a company that independently searches individual court systems, or a third-party company that checks many court systems’ databases.

Lie detector

It isn’t likely that you’ll feel the need to do a polygraph test on potential employees. That’s a good thing, considering that most uses of lie detector tests violate many state and federal laws guarding employee privacy. The results themselves may be inconclusive, but you could easily ask a question that violates the person’s privacy inadvertently.

In addition to being highly questionable in legal terms, many criminal trials don’t even allow polygraph results as evidence anymore because they are not seen as reliable anyway. Rather than measuring whether or not you are telling the truth, they measure your body’s reaction to being asked questions in a stressful situation.

The few exceptions of jobs that may permit lie detector tests are armored car drivers, guards, alarm service workers, and employees who will make or hand out medicines.

Medical records

Check your state’s laws about medical records to find out just how much you are allowed to ask a person about his or her medical history.

If you are aware of a disability or a genetic disposition, you as the employer are not allowed to make decisions based off of those factors. Additionally, you cannot refuse to grant someone a job based on a physical or mental impairment according to the Americans with Disabilities Act.

You can, however, ask about the person’s ability to perform the tasks associated with the job. Otherwise, you may obtain information about drug use through mandatory drug testing. Also, employees have no privacy rights over anything that they post publicly on social media.


The Federal Bankruptcy Act does not allow employers to discriminate against anyone who has filed for bankruptcy at any time. You cannot hire or fire an employee based on anything you find in his or her credit report, including bankruptcy.

You would, however, see the bankruptcy on the person’s credit report if you chose to include that in a background check. Chapter 7 and Chapter 13 bankruptcies are both public records, although you are much more likely to find out about a Chapter 13 bankruptcy.

In either case, you may not fire or demote an employee who has filed for bankruptcy. You also may not reduce his or her rate of pay or take away responsibilities based solely on the bankruptcy. If other factors are to blame for your negative actions, make sure you have proper documentation.

Military service

You can find out a few things about the military service record of a potential employee without violating any privacy rights. The best-case scenario is to ask about military service if you plan on showing preference to veterans.

The military will release details such as name, rank, duty assignments and awards without first consulting the service person. For any other information, though, you will have to request permission from him or her before you inquire about anything further.

Because age discrimination is becoming more common, you cannot use the applicant’s service dates to disqualify him or her from a job. Similarly, it is a slippery slope asking about the reason for discharge. This could lead to questions about misconduct or health issues that aren’t relevant to the job.

Relevant inquiries about military service include those concerning training, work experience, duties, rank, and pay during service.

School records

School transcripts are sealed. They must be accessed be requesting permission from the applicant.

Transcripts are another area in which you must be careful not to violate the potential employee’s privacy. Private information is found on school records, in addition to sensitive information like age, race and gender.

If a transcript will help you make the best decision about whom you should hire, by all means, request it. Classes taken and even GPA could be factors in your choice. Classes failed should not factor into your choice.

Additionally, you may ask questions about the applicant’s ability to speak multiple languages, but laws prohibit you from asking questions about how he or she learned those languages. You must also avoid asking questions about the schools the person attended that would reveal religious beliefs, other affiliations or gender of the applicant.

Workers comp reports

Workers’ compensation records are public record, but it’s always a good policy to give the applicant a chance to explain any workers’ compensation claims he or she has made in the past for the sole reason of ensuring the person is healthy enough to do the job for which he or she is being interviewed.

You should be very specific about the duties and ask if the person is capable of performing those tasks.

For this reason, it may be best to wait until you have made a conditional offer to the applicant to ask about workers’ compensation claims. If you find that the applicant has made several claims over the years, especially if it is evident that the applicant does not have a disability, this could be a factor in your decision to hire or not hire the person.

Because workers’ compensation and medical information are closely related, your questions may border against sensitive information.

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Part One: Hire Your First Employee

Part Two: Contractor or Employee?

Part Three: Required Employee Benefits

Part Four: Pre-Employment Background Checks

Part Five: Employee Handbooks