Overview
Falsified or misleading information on job applications is common and can expose employers to serious risks, including theft, workplace harassment, and negligent-hiring claims.
Background screening is the primary way to verify applicant information and reduce liability, but checks must be done carefully and consistently to be effective and compliant with applicable laws.
Key takeaways
- Perform comprehensive checks (national and county-level) to improve accuracy.
- Follow Fair Credit Reporting Act (FCRA) requirements: get written consent and allow disputes.
- Document and apply consistent hiring criteria so decisions are defensible.
How it works
Most background-screening programs combine identity verification, employment and education verification, criminal-record searches, and reference checks to build a complete picture of a candidate.
Employers should obtain written authorization before ordering consumer reports and must provide required notices if adverse action is taken based on a background check.
For employers who want guidance on how hiring choices affect insurance exposure and coverage, see Hiring — Insurance Risks & Coverage.
What it may cover (and what it may not)
Comprehensive background checks can identify criminal histories, prior employment discrepancies, and credential falsification, all of which help assess suitability for sensitive roles.
However, screening has limits: some records are sealed, expunged, or inaccurate; county court searches often uncover convictions that national databases miss.
If your organization uses leased employees or staffing arrangements, consider how screening responsibilities and liability are shared; more information is available for companies that use staffing or leasing models at PEO/Employee Leasing/Temp Employment Insurance.
Common mistakes to avoid
- Relying only on resumes or online profiles without independent verification.
- Failing to obtain written authorization or to provide FCRA disclosures when required.
- Applying background policies inconsistently across candidates or roles.
- Not documenting the business reason for disqualifying criteria or failing to update criteria as roles change.
Questions to ask an agent
- Does our commercial policy consider negligent-hiring exposures for the roles we fill?
- What limits and endorsements should we consider for hiring-related liability and employee theft?
- Can you recommend screening vendors or practices that align with our insurance requirements, especially if we place candidates through search or recruiting services like Insurance for Employment Executive Search Agencies?
- How often should we review our screening program and the policy language that relates to hiring risks, and when should we talk to an agent about changes?
Next steps
Create a written background-check policy that defines which positions require screening, what records will disqualify an applicant, and how you document decisions.
Train hiring managers on FCRA compliance and fair application of criteria, and schedule regular audits of your screening process to confirm consistent implementation.
If you lack in-house resources, consider outsourcing to a specialist screening firm and review their methods and compliance certifications before contracting.
Frequently Asked Questions
When do I need written permission to run a background check?
You should obtain written authorization before ordering any consumer report used for employment decisions, and provide required pre-adverse and adverse action notices under the FCRA.
Are national databases enough to find criminal records?
No—national databases can miss county-level convictions, so combining national and county searches gives a more complete result.
Can a candidate dispute information found on a report?
Yes; under the FCRA, candidates have the right to dispute inaccurate or incomplete information and the employer must allow them to do so before taking adverse action.
Should small businesses perform background checks on all hires?
It depends on the role and risk; at minimum, check employees in positions of trust or with access to sensitive data or customers, and apply the same standards consistently.