How to Run Effective & Legal Background Checks for Employment

The cost of overlooking the background checks is more than the cost spent on a salary. Because a bad hire can result in fines, damage to your company’s reputation, and a loss of trust from clients.

Employers conduct background checks as part of the hiring process to verify a candidate’s identity, qualifications, and potential risks to ensure a safe, compliant, and trustworthy workplace.

Employee screening enables businesses to identify the most suitable candidate for an open position. The process of Employee background screening should be fair and legal.

Before employee onboarding, the following background checks are often conducted:

• Criminal history,
• Employment details
• Education verification,
• Driving records and more.

Business proprietors screen clients daily to prevent ongoing risks. Yet when it comes to their teams, a background check is often treated as a one-time formality.

A background check should be a continuous process, not limited to hiring alone. In regulated industries, periodic re-screening helps businesses stay ahead of emerging threats that may not be immediately apparent.

What is an Employment Background Check?

Candidates’ information is collected and verified through searching public records, databases, and accessing other sources in employment background checks.

Other sources in employment background checks may include credit reports, social media activity, academic history, professional licenses, and references from previous employers.

A resume only tells you what a candidate wants you to know. But what about the rest of the story? A thorough background check helps you see the full picture, assess potential risks, and make a hiring decision you can be confident in.

Especially in regulated sectors, an Employee Background check is a must to comply with international and local laws such as the U.S. Fair Credit Reporting Act (FCRA), the UK’s FCA guidelines on Customer Due Diligence.

What Details are Revealed in a Background Check?

Background checks vary depending on what is checked, which in turn depends on the type of screening, the organization involved, and applicable legal guidelines. Employers select checks, such as criminal, education, or financial records, depending on the role.

Typically, there can be the following possibilities of information appearing in a background check:

Criminal Background Screening

This can be done to assess a candidate’s criminal history, including involvement in less serious crimes (misdemeanors) and more serious crimes (felonies), arrest records, and unresolved or ongoing criminal cases.

Checks include extracting information from federal, state, and local records, depending on the depth of the search. Criminal records enable employers to assess the risks associated with candidates, thereby protecting clients or staff from potential threats and maintaining a safe workplace.

Not all crimes pose equal risks; some crimes, such as sexual offenses, require more attention and need to be checked against databases such as the National Sex Offenders List.

National Sex Offenders List

Screening the candidates against national sex offenders is another crucial step in the Employee Background Check Services. The registry allows businesses to identify the individuals who have been legally found guilty of sexual offenses and ensure a safer workplace. This list is specific to the U.S. and not applicable internationally.

Under federal laws, such as the Adam Walsh Child Protection and Safety Act of 2006, and specific state-level requirements, organizations, especially those working with children and the elderly populations, are often required to conduct these checks.

Employment History Verification

It verifies the candidates’ provided past employment information, such as the positions they held, the duration of their employment, and the name of the employer in their previous organization. The confirmation of past work experience allows organizations to assess whether a candidate’s skills are suitable for the current position.

Education Record Check

Employers check the listed degrees, dates of attendance, and enrollment in the provided academic record of a candidate. This verification helps prevent hiring someone who submits false academic documents and misrepresents their education to secure a position in the company.

Driving History Verification

Positions that require operating motor vehicles need to verify the motor vehicle records (MVRs) such as license, traffic violations, accidents resulting from speeding or negligence, or Driving Under the Influence (DUIs).

Legal Dispute Checks

Employees are screened against legal records, including lawsuits, judgments, debt records, liens, and other non-criminal records. These checks in Employee background screening are a must for managerial and financial-related positions.

Credit History Verification

This check provides employers with details about a candidate’s payment history, including any pending debts, default reports, and bankruptcies. Certain roles require this kind of information, where managing financial assets and transactions is necessary to fulfill the assigned responsibilities.

Drug Screening Test

Before hiring and sometimes after onboarding, drug testing is conducted to identify whether a candidate is under the influence of some kind of drug, which can impact the productivity of a person and their surroundings. It ensures a safe and productive work environment.

Healthcare Sanctions and Exclusions Check

Healthcare sanctions checks apply to healthcare workers, including doctors, nurses, and allied staff. These screenings check if a professional has faced penalties, license suspensions, or been excluded from federal or state healthcare programs due to regulatory violations.

For instance, if a doctor prescribes the wrong medicine to a patient, their license can be revoked. In the U.S., these checks involve screening against several critical databases:

• HHS OIG LEIE: The Department of Health and Human Services’ Office of Inspector General (OIG) maintains the List of Excluded Individuals/Entities (LEIE), which contains individuals and companies barred from federal healthcare programs.
• State Medicaid Lists: In addition to the federal list, individual State Medicaid Agencies maintain their own lists of locally excluded providers.
• DEA Exclusions: The Drug Enforcement Administration (DEA) provides data on practitioners whose authority to handle controlled substances has been revoked.
• FDA Debarment List: The Food and Drug Administration (FDA) identifies individuals and companies barred from participating in the drug industry or clinical trials.
• NPDB: The U.S. Department of Health & Human Services manages the National Practitioner Data Bank (NPDB), which contains records on professional licensure, malpractice, and disciplinary actions.

By checking these sources, healthcare organizations confirm that workers are suitable for their roles, fostering a safer and more trustworthy environment for patients.

Why Do Employers Run Background Checks In Hiring?

Employers conduct background checks for different reasons, such as

• Verifying their qualifications
• Confirming the eligibility of the candidate
• Ensuring workplace safety
• Maintaining the customer and  public trust

Failure in employee screening leads to legal repercussions and reputational damage. To meet these goals, businesses focus on the following key areas during the background screening process:

Choosing a Suitable Candidate

The requirements for every announced job opening are different. Some professional roles require a specific set of skills, specialization in a particular field, or experience in a specific area.

Employee background check services help verify whether a candidate holds the required qualifications, certifications, or experience for the role. While documents don’t guarantee performance, they confirm that the individual is eligible and meets the criteria for assigned responsibilities.

Risk-Based Approach

Each candidate is assessed based on the potential risks and level of sensitivity associated with the role. Not all positions require the same level of scrutiny, such as senior roles, finance positions, or jobs involving kids or elderly populations, which require more thorough background checks.

During interviews, it’s challenging to identify hidden risks, such as past regulatory violations or involvement in criminal activities. That’s why background checks are used to assess a candidate’s history and ensure the level of risk is acceptable for the current role.

Building a Safer Workplace

Employers prioritize the safety of their teams and the trust of clients. Before hiring, they evaluate key risk areas such as criminal history, prior misconduct, or false documentation. By identifying these red flags early, background checks help prevent internal threats, legal issues, and reputational harm, ultimately protecting both employees and the business.

Building Trust for Clients

A Thorough Employee Background check helps build trust between the organization and its clients by choosing trustworthy, responsible, and efficient employees. It ensures that employees can deliver effective services to clients and organizations.

Compliance Requirement

Certain positions in the hiring process follow an employee screening framework according to federal, state, and local laws. For example, under the U.S. Fair Credit Reporting Act (FCRA), employers are required to obtain consent and follow specific procedures when conducting background checks.
Specific industries or positions require a detailed checklist for employee background checks to ensure compliance with relevant regulations.  For instance, organizations that work as federal contractors must check if a candidate is on any federal debarment lists.

Sanction Compliance

Under relevant U.S. sanctions compliance requirements, such as those enforced by the Office of Foreign Assets Control (OFAC), businesses must screen individuals to avoid hiring individuals who are sanctioned or those linked to restricted entities.

Online background checks help streamline this process by offering real-time screening across global watchlists, which enables businesses to avoid unintentionally hiring sanctioned individuals and potentially avoid civil or criminal prosecution.

Legal Requirements for Employee Background Checks

The following are certain laws that are followed in employee background check services:

Fair Credit Reporting Act (FCRA) for Employers

FCRA is a federal law that mandates employers to obtain proper consent from candidates and notify them before conducting an employment background check. If information from the check leads to a decision not to hire the candidate, the employer must follow a formal process known as adverse action.

Equal Employment Opportunity Commission (EEOC) Guidelines for Hiring

The EEOC guidance suggests that employers are not allowed to reject employees solely based on their criminal record. They must consider other factors, such as the nature of the offense, how long ago it occurred, and whether it’s directly related to the job role.

There are exceptions to EEOC guidance, particularly when other legal or regulatory frameworks disqualify candidates from holding specific positions due to their criminal record.

Role of Title VII of the Civil Rights Act of 1964 in Employee Screening

U.S law Title VII of the Civil Rights Act of 1964 is enforced by the EEOC, which mandates fair hiring and prohibits discrimination based on race, color, gender, and nationality of candidates

Ban the Box Laws and Their Effect on Background Checks

Fair hiring laws, also known as Ban the Box laws, remove questions from job applications related to criminal records, such as arrests and convictions. It prefers hiring based on the skills and experience of candidates rather than rejecting them for past mistakes.

It encourages questions at a later stage, such as during the employee onboarding process. More than 180 states, cities, and countries worldwide are implementing these laws.

Regulatory Guidance

While the U.S. enforces sanctions screening through agencies like OFAC, other countries have issued their regulations and guidance. For example, the United Kingdom oversees sanctions enforcement through its Office of Financial Sanctions Implementation (OFSI).

In September 2024, the OFSI released an advisory highlighting the importance of conducting employee background checks. It mentioned the risk of North Korean IT workers providing freelancing services online and using false information to secure employment.

The guidance recommended performing pre-employment background checks and screening against sanctions lists to ensure sanction compliance with UK laws.

Step-by-Step Guide to Employment Background Checks

Employment background checks allow businesses to create a safer working environment and ensure compliance with federal, state, and local laws. Guidelines for developing a background check policy are given below:

Develop an Employment Background Check Policy

Have a clearly written policy that outlines the required checks for each role and states the procedure for how they should be done. It should be uniformly implemented throughout the entire organization and prevent discriminatory acts during the hiring process.

Policies should outline relevant checks for different roles. For instance, finance requires checking credit card history, while in the health sector, ethical behavior, previous experience, and medical licenses are also verified.

Impact Evaluation for Specific Roles

Background check results will influence hiring decisions. Businesses must be clear in their policies about what kind of information will be taken into account for applied positions. For example, this includes the role for which the candidate is applying, the nature of the crime in which the candidate was involved, and when it occurred.

Establish Background Check Timing

Businesses should determine when background checks will be conducted, either before or after hiring, and the duration of the screening process for existing employees; all must have a written screening policy.

In comparison to local and state laws, under federal laws, employers can conduct employment screenings at any stage, provided they obtain consent from the candidate.

Understand Legal Compliance Requirements

Businesses must comply with federal, state, and local laws, as background checks are regulated under these laws. As per the Fair Credit Reporting Act (FCRA), candidate consent is necessary before performing employment background checks on the candidate. This should be clearly communicated to the individual before any screening process begins.

Select a Suitable Background Check Company

Businesses should select a background check provider depending on the level of sensitivity of their business and the potential risks they may face due to a bad hire. A suitable background check provider should be able to cater to your specific employee background requirements, hiring volume, business size, geographic linkages, and the size of your team members.

Choose the Right Employee Background Check

Different roles require different scrutiny; for example, sanctions screening will be required for finance and compliance-related roles. Driving history will be important for delivery-related services.

Consider Fairness in Background Checks

Respect candidate rights and communicate all details about employment background policies. It encourages openness in return and allows them to view their background check results and explain any alerts.

Why Choose AML Watcher for Employee Screening?

Recruiters, business owners, and compliance teams are responsible for hiring candidates who require employee background checks to verify candidates’ information through legal records. It ensures they are not linked to criminal or sanctions lists and helps ensure compliance with employment laws.

• Tailored Background Checks

AML Watcher offers pre-employment background checks, criminal background checks, and other checks according to your industry requirements. This includes specialized screenings for the healthcare industry, which review professional licenses and check against federal and state exclusion lists to ensure compliance and patient safety.

• Multi-Dimensional Screening

AML watcher empowers businesses with transparent, automated, and regulatory-compliant employment background Checks. Our Employee background screening system offers multi-dimensional screening, including ‘Demographic Information, Facial Biometric, Geographical Risk Mapping, Employment and Educational Records’ and critical healthcare sanction and exclusion checks.

• Risk-free Hiring

AML Watcher helps identify the following red flags during the hiring process:

• The candidate has a criminal record linked to criminal activities
• The candidate is under any active arrest warrant issued by the police
• Facing any probation period after a previous crime
• Or under any global sanctions lists and watchlists

This check is performed by reviewing several international regulatory databases, including UN Security Council Resolutions and OFAC Sanctions.

• Risk-Based Approach to Screening Process

AML Watcher screens to identify high-risk individuals, including those who are subject to sanctions. It assesses risks associated with part-time, full-time, and remote employees by offering detailed background checks.

The solution generates automated alerts when a high-risk client is identified. It offers custom risk mapping and action options to set a threshold for alerts, resulting in fewer false positives and an optimal risk assessment.

AML Watcher screens candidates for more than just criminal records, covering warning lists, regulatory enforcement, fitness & probity lists, and exclusions lists such as the US SAM Procurement Exclusions lists to prevent high-risk hires.

• Sanctions Screening

The platform utilizes a database spanning 215+ global sanctions regimes, whereas many traditional screening tools focus only on national criminal databases. However, it detects sanctioned entities in real-time using updated lists, phonetic matching, and secondary sanctions detection.

There could be lies behind some resumes. Contact us to identify potential red flags before hiring and safeguard your business against reputation and financial harm, as well as penalties.