Background Check Laws: What You Need to Know

Running a background check on a new hire is a no-brainer: you need to protect your team and your business.

But before you do, it’s crucial to know the background check laws that prevent private employers from looking into certain aspects of an applicant’s life. 

For example, in New York and California, it’s illegal to run a check on an applicant’s credit or criminal record. This is to prevent discrimination against convicted felons. 

And it’s not just states. Cities do, too!

Background check laws vary greatly across America. That means that if you’re a new business owner, or you’ve just moved states, it’s important to stay up to date or you’ll risk running an illegal background check.

So let’s take a look at the most important laws you should know about.

Federal background check laws: What to be aware of

On top of various employee background check requirements at the state and municipal levels, there are also federal laws to be aware of.

FCRA

The Fair Credit Reporting Act (FCRA) requires that anyone performing a credit check take several steps during that process to protect the consumer. Prospective employers performing credit checks must:

1. inform the individual in writing that the business might use the information for employment decisions;

2. inform the individual about their right to a description of the information being investigated;

3. receive written permission from the individual to do the credit check; 

4. provide a copy of the report in the event that the information found therein affected the ultimate hiring decision; 

5. provide the applicant with the opportunity to dispute the decision based on those findings; and

6. certify to a third party that permission was obtained from the individual to seek this information. It must also be certified that FCRA requirements were followed.

EEOC

The U.S. Equal Employment Opportunity Commission (EEOC) is a department that enforces laws around discrimination and hiring. Per EEOC regulations, employers cannot discriminate against any applicant based on:

• Race
• Color
• Sex
• Religion
• Pregnancy/related conditions
• Gender identity
• Sexual orientation

That means that the same background check protocol must be applied to all applicants regardless of their background. Additional information cannot be checked for due to the applicant’s race, gender, sexuality, or any other aspect of their background—including a suspected criminal record.

DPPA

The Drivers Privacy Protection Act (DPPA) is a series of safeguards that protect licensed drivers from having their personal information improperly used. 

This is relevant to background checks as a state-issued IDs or driver's licenses are typically used in the process. As any DMV is prohibited by law from releasing personal information related to someone’s driving record, you’re better off not asking!

Child Labor Laws

The Fair Labor Standards Act (FLSA) includes child labor law protections. These ensure you don't employ anyone under the state's minimum age, improperly use or disclose their information, or overschedule workers under a certain age.

National Instant Criminal Background Check System

The National Instant Criminal Background Check System, or NICS, is the FBI's system for checking who can and can't own a firearm. This type of check is typical for businesses that sell firearms, such as pawn shops, sporting goods retailers, and gun shops.

Employment background check laws by state: A primer

Employee background checks are a usual part of hiring and onboarding, but the process itself can vary. Depending on your state—and even your city—specific restrictions or regulations may apply. 

Here are just some of the unique situations that might arise with background checks when hiring:

• Ban the box: Ban-the-box laws make it illegal for any federal agency to ask an applicant about their criminal history before they've been made a job offer.
• Credit report restrictions: The Fair Credit Reporting Act makes it illegal to access someone's credit information without receiving their written consent, regardless of your state.
• State-specific privacy laws: Most states have some variation of privacy laws protecting people from things like unauthorized data access and redistribution of protected information.
• Salary history inquiry laws: Many states have salary history laws, which make it illegal to ask an applicant about their previous salary when discussing a role.

When in doubt, check with the U.S. Equal Employment Opportunity Commission and ensure you’re compliant with all national and local laws.

What state doesn't do background checks?

Background checks may be a part of your hiring process. If you choose to run background checks, make sure you’re compliant with background check requirements by state. And regardless of where you’re located, make sure to factor background checks into your new hire cost and processes.

What is a red flag on a background check?

Ideally, a background check will come back with nothing significant! But red flags can occur on a background check. (Not to be confused with resume red flags, though these are also important to pay attention to!)

Here are some of the most common aspects of a background check that might warrant a closer look:

• Criminal history: Certain convictions could tell you something important about how this candidate would fare in the position, especially sexual or violent offenses. But note that some states prohibit hiring discrimination based on criminal history, and others prevent you from running a criminal record check at all. We go into some of these details down below..
• Discrepancies in information provided: Mismatched hiring dates, job titles, or certifications with what the candidate told you on their resume or in interview may be worth following up on.
• Negative employment history: If a candidate has a history of workplace altercations, multiple firings, or misconduct investigations, that’s good information to take into account.
  

• Professional license violations: Improper use of a professional license, like a tax license, can be a red flag, especially if the position requires this type of work.
  

Depending on the nature of your business, you may belooking for other important credentials that can raise red flags in the background check phase. Some of the above red flags may vary in importance for your organization. Just remember to stay compliant with hiring discrimination laws in your assessments!

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Three states that changed their background check laws in 2021

Background check laws aren’t set in stone. It’s a good idea to check your state’s most recent laws to ensure they haven’t changed. Here are three states that had major overhauls to their background check laws in 2021.

Georgia 

Gov. Brian Kemp signed the “Second Chance Law” August 2020, which extends their background check law to allow more Georgians to restrict and seal criminal conviction records for certain misdemeanor and felony convictions. The law prohibits employers from viewing these records when they conduct a criminal background check. 

The new bill removes the age limitation for most criminal offenses. Individuals can also now petition the court to restrict and seal up to two misdemeanor convictions from their record. They may also request to have any pardoned offenses removed from their record, as long as they weren’t serious violent felonies or sexual offenses. 

The law took effect January 1, 2021.

Missouri 

Like many US states, Missouri implemented a “ban-the-box” law in 2021. The law prohibits employers from making any hiring or promotion decisions based on someone’s criminal history. The law, which affected employers with at least 10 employees, took effect January 1, 2021. 

Employers also may not exclude applicants with a criminal history on their job postings, or use exclusionary language on any forms used in the hiring process.  Lastly, applicants may only be asked about their criminal background after the employer has interviewed them and determined they are qualified for the role. 

Washington 

Although Washington has a ban-the-box law that prohibits employers from asking applicants about their criminal history before determining that they are qualified for the job, childcare businesses are exempted from the law. 

The state requires childcare businesses to conduct background checks on anyone “who is authorized to care for or have unsupervised access to children in early learning programs.”

The new law prohibits these employers from denying employment if an applicant’s background check reveals an instance of child abuse or neglect and the individual has since obtained a certificate of parental improvement. This law took effect January 1, 2021. 

Need help applying these laws to your business?

You want to help your company build the best team possible. Rather than stress about compliance, you should be focusing on landing the best seasonal employees, developing a stellar culture, or delivering the best new hire experience possible.

Homebase offers HR advice and compliance support, all of which can help you track applicants, safely store and track personal information, share e-sign documents, manage PTO, and more.

Stay compliant while staying focused on what matters most: delivering the best employee experience possible.

Try Homebase for free today.