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  • Hiring: What You Need to Know
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    How to Perform a Background and Reference Check

    As a business owner, it may be harder for you to deal with the risks and liabilities of making a bad hiring decision. If you’re hiring a single employee, putting the wrong person in that chair could cost your business plenty in lost time and money. So it often pays to perform thorough background and reference checks on any serious candidate.

    Background Checks
    The term “background check” is an informal way to describe any combination of reports collected about an individual for employment purposes. A background check, or more accurately, a “consumer report,” must fall under national standards set by the federal Fair Credit Reporting Act (FRCA). The law, which is enforced by the Federal Trade Commission (FTC), sets safeguards on the type of information that can be collected and who is entitled to see it. States have their own rules, which often further define or expand the data that can be included. For a background check to qualify under the FCRA, it must be prepared by a third-party consumer-reporting agency (CRA), such as Experian or Equifax.

    The primary purpose of the background check is to verify the accuracy of information your job applicant has supplied, not to dig up “dirt.” Some of the information you might obtain, depending on your state laws and the type of job, includes:

    • Credit history
    • Past employment records
    • Professional licenses
    • Criminal records
    • Education
    • Driving records

    Reference Checks
    While background checks are not mandatory, and may be more important for certain types of jobs, all employers should perform basic reference checks on a serious applicant. This can be done with a phone call to the candidate’s former employer to verify job related information such as dates of employment, salary, job title, and work performance.

    The types of questions you can and cannot ask during a reference check are similar to those in a job interview. Stay within the realm of the job and ask fact-based questions while avoiding personal questions that get into the EEOC discrimination categories of race, color, religion, sex, national origin, age, or genetic information. You’ll want to get written permission from the applicant to check references.

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    • To keep yourself in compliance with the laws, become familiar with the dos and don’ts for background and reference checks. A list of the types of background information that might be available to you as an employer can be found on this sba.gov page. For some general tips on checking employment references, read this article.
    • For a summary of employees’ rights under the FRCA, download this pdf.