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  • Writer's pictureSubhan Tariq, Esq

How Employers Conduct Background Checks and Its Legal Challenges

Employee Background Check

Background investigations and reference checks are employers' principal means of securing information about potential hires from sources other than the applicants themselves. A background investigation generally involves determining whether an applicant may be unqualified for a position due to a record of criminal conviction, motor vehicle violations, poor credit history, or misrepresentation regarding education or work history. A reference check generally involves contacting applicants' former employers, supervisors, co-workers and educators to verify previous employment and to obtain information about the individual's knowledge, skills, abilities and character.

Some Reasons to Conduct

There are many reasons employers conduct appropriate levels of screening for prospective employees through a background investigation, a reference check or both.


A major reason to conduct background and reference checks is to avoid harm or legal liability of various types to the employer or to others. This includes harm to:

  • Other employees by sexual harassment or workplace violence.

  • The organization's customers by, for example, sexual assault on business premises.

  • The public by negligent driving.

  • The employer's business through financial loss or image and reputational issues.

Defense of legal claims, such as negligent hiring, is a compelling reason to conduct in-depth criminal records searches of job applicants. A multilevel jurisdictional criminal records search can be strong evidence that the employer exercised due care in hiring.

Legal Challenges in Conducting Background Investigations

Human resource professionals must deal with a variety of legal challenges when conducting background investigations.

Federal law


Several federal laws explicitly or implicitly apply to the practice of background investigations.

Fair Credit Reporting Act (FCRA). The FCRA regulates the use of consumer credit reports and investigative consumer reports and applies when a third party conducts background checks on behalf of an employer. Inquiries about job performance cross into the world of investigative consumer reporting. An investigative consumer report includes character references or personal opinions in addition to verifications of public record sources typically found on a basic consumer report. Proper written disclosure and candidate notification for this type of inquiry, required under the FCRA, should be issued before requesting a credit report.

Fair and Accurate Credit Transactions Act (FACT Act, or FACTA). Among other things, the FACT Act, which amends the FCRA, governs the secure disposal of consumer credit information.

Equal employment opportunity (EEO) laws. Employers should take care to ensure that background investigations comply with all applicable EEO laws. A risk is that reliance on background investigations alone may result in adverse impact discrimination.

Immigration Reform and Control Act of 1986 (IRCA). IRCA prohibits discrimination based on national origin or citizenship, except for undocumented immigrants, for employers that have four or more employees. The Form I-9 employment verification process stems from IRCA, and while this verification occurs after hire, it's important to understand that applicants' national origin or citizenship cannot be used against them if discovered before hire.

State law

Various state laws may overlap with some of the relevant federal laws; moreover, states may have additional requirements with respect to:

  • Obtaining a consumer credit report.

  • Controlling illegal immigration.

  • Safeguarding information.

  • Retaining records.

  • Checking criminal histories before an offer of employment.

Employers need to check the state laws in which they employ workers for specific compliance details.

Questions regarding background investigation and reference checks, call our firm today 718-674-1245 or message here.



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