How to Do an Employee Background Check: The Complete Guide for 2025

In today’s competitive job market, hiring the right talent isn’t just about finding impressive resumes and charming personalities. Ensuring your candidates are exactly who they claim to be has become an essential part of the hiring process. According to recent studies, a staggering 92% of employers now conduct some form of background check during their hiring process, with 15% rescreening current employees annually. But how exactly do you conduct an employee background check that’s thorough, legal, and fair?

What is an Employment Background Check?

An employment background check verifies a job candidate’s credentials by searching public records, databases, and other sources. It goes beyond resumes to confirm critical details like criminal records, employment history, education, licenses, and, in some cases, credit history.

More than a formality, background screening is a vital risk management tool that protects organizations, employees, and customers. Unlike casual online searches, professional checks require consent and must comply with federal, state, and local regulations.

Why Background Checks Matter: Benefits for Employers

Implementing a thorough background check process offers numerous advantages that directly impact your company’s success and safety:

Enhanced Workplace Safety

Perhaps the most crucial benefit is creating a safer work environment. Background checks help identify candidates with histories of workplace violence, theft, or other concerning behaviors that could put your team or customers at risk.

Reduced Hiring Risks and Liability

Proper screening helps protect against negligent hiring claims. If an employee causes harm and it’s discovered that a reasonable background check would have revealed concerning history, employers can face significant legal liability. Courts increasingly expect employers to take reasonable steps to verify who they’re bringing into their organization.

Verified Qualifications

Resume fraud remains surprisingly common. A 2023 survey revealed that 78% of hiring managers have caught candidates lying on their resumes. Background checks verify that candidates actually possess the education, credentials, and experience they claim, ensuring you’re getting the qualified professional you think you’re hiring.

Improved Quality of Hire and Reduced Turnover

Candidates who misrepresent their backgrounds often lack the skills needed for success. Thorough screening helps ensure better matches between candidates and positions, leading to improved performance and retention. Companies with comprehensive background screening report up to 25% lower turnover rates compared to those with minimal verification processes.

Regulatory Compliance

Many industries have mandatory background check requirements. Healthcare organizations must screen against federal exclusion lists, financial institutions have FINRA requirements, transportation companies must follow DOT regulations, and educational institutions typically require checks against sex offender registries. Proper screening keeps you compliant with industry-specific mandates.

Legal Framework for Employment Background Checks

Before conducting any background checks, it’s crucial to understand the complex legal landscape governing them. These regulations exist to protect candidate privacy and prevent discrimination while allowing employers to make informed decisions.

Federal Regulations

The Fair Credit Reporting Act (FCRA) is the primary federal law governing employment background checks conducted through third-party agencies (known as consumer reporting agencies). When using a background check company, employers must:

• Provide disclosure in a standalone document that a background check will be conducted
• Obtain written consent from the candidate
• Follow specific adverse action procedures if declining a candidate based on report findings
• Allow candidates to dispute inaccurate information

The Equal Employment Opportunity Commission (EEOC) enforces Title VII of the Civil Rights Act, which prohibits employment discrimination based on race, color, religion, sex, or national origin. This affects background checks because some screening practices can have a disproportionate impact on protected groups.

The EEOC recommends:

• Not implementing blanket policies that exclude all candidates with any criminal history
• Conducting individualized assessments for candidates with criminal records
• Considering the nature of the crime, time elapsed, and relevance to the specific job

State and Local Laws

Many states and municipalities have enacted their own regulations that may be more restrictive than federal laws. Key areas to be aware of include:

• Ban the Box Laws: Over 35 states and 150 cities have enacted these laws, which prohibit employers from asking about criminal history on initial job applications. Some versions also regulate when in the hiring process background checks can be conducted.
• Marijuana Legalization: With changing cannabis laws, many states now restrict how employers can use marijuana test results in hiring decisions, especially for non-safety-sensitive positions.
• Credit Check Limitations: Several states, including California, Colorado, and New York, have restricted employers’ ability to use credit checks for employment purposes unless directly relevant to the position.

Types of Employment Background Checks

Employers can choose from various screening options based on their industry, position requirements, and risk management approach. Here are the most common types of pre-employment background checks:

Criminal Background Checks

Criminal record checks reveal a candidate’s criminal history, which may include misdemeanors, felonies, pending cases, and sometimes dismissed charges depending on jurisdiction. These checks can be conducted at different levels:

• County searches: Most detailed and accurate, but limited to specific counties
• State searches: More comprehensive but vary in quality by state
• Federal searches: Cover federal crimes not found in state or county systems
• National database searches: Cast a wide net but should be verified with county searches
• International criminal checks: For candidates who have lived abroad

For positions involving vulnerable populations, financial responsibility, or security access, criminal checks are particularly important. However, employers should consider relevance, job-relatedness, and time elapsed since any convictions when evaluating results.

Verification Checks

These checks confirm a candidate’s background claims:

• Employment history verification: Confirms previous employers, job titles, dates of employment, and sometimes reasons for leaving
• Education verification: Verifies attendance dates, degrees obtained, and majors
• Professional license verification: Confirms valid licenses, certifications, and any disciplinary actions
• Reference checks: Provides insights into work habits, reliability, and strengths/weaknesses

Verification checks are crucial for detecting resume fraud and ensuring candidates have the qualifications they claim. According to industry data, approximately 23% of education claims and 27% of employment histories contain significant discrepancies.

Additional Background Check Types

• Social Security number verification: Confirms the validity of the SSN and that it matches the candidate
• Credit checks: Examines financial responsibility (important for financial positions)
• Motor vehicle records: Reveals driving history (crucial for positions involving driving)
• Drug testing: Checks for substance use according to company policy
• Healthcare sanctions: Identifies penalties against healthcare professionals
• Global watchlist searches: Checks against terrorism, fraud, and sanctions lists

Step-by-Step Guide: How to Conduct Background Checks

Now that we’ve covered the foundations, let’s walk through a practical process for implementing effective background checks in your organization:

Step 1: Develop Your Background Check Policy

Before conducting any background screening, establish a written company policy that clearly defines which positions require checks, the types of screenings conducted for each role, how results will be evaluated, procedures for handling adverse information, and record-keeping guidelines. A well-documented policy ensures consistency across the organization while allowing flexibility based on position risk levels. Training hiring managers on proper implementation is essential to maintaining fairness and compliance.

Step 2: Understand Legal Requirements

Review all federal, state, and local laws relevant to your locations, including FCRA requirements, Ban the Box laws, industry-specific regulations, and state restrictions on certain background checks. Since these regulations vary widely by location and industry, consulting legal counsel can help ensure your screening process remains fully compliant.

Step 3: Choose Your Background Check Approach

Decide whether to conduct background checks in-house or partner with a qualified background check provider. While basic verifications can be handled internally, most organizations benefit from specialized providers due to their compliance expertise, access to comprehensive databases, faster turnaround times, reduced liability, industry-specific knowledge, and integrated adverse action workflows. When choosing a background check provider, assess their accuracy, compliance knowledge, turnaround time, cost, and customer support.

Step 4: Obtain Proper Consent

Before conducting a background check through a third party, you must provide a clear disclosure in a standalone document, obtain written consent from the candidate, and certify to the background check provider that you will follow FCRA requirements. While digital consent processes are becoming more common, they must still meet all legal standards for clarity and format.

Step 5: Conduct the Background Check

Once consent is secured, initiate the background screening process by providing accurate candidate information and specifying which checks to conduct based on your policy and the position. Track progress through the provider’s system or regular updates, and document all steps for compliance purposes. Maintain transparency with candidates about expected timeframes and notify them of any delays. While most standard background checks are completed within 2-5 business days, some verifications may take longer.

Step 6: Review and Evaluate Results

When results arrive, review them carefully by checking for any discrepancies between the candidate’s provided information and the findings. If criminal history is present, evaluate it using the EEOC’s recommended factors: the nature and gravity of the offense, the time elapsed since the conviction or sentence completion, and the relevance of the offense to the job. Document the evaluation process for each candidate and ensure consistency in how findings are assessed to prevent discrimination claims.

Step 7: Follow Adverse Action Procedures (When Necessary)

If you’re considering rejecting a candidate based on background check findings, you must follow these FCRA-mandated steps:

1. Pre-adverse action notice: Provide the candidate with:
   • A copy of the background report
   • A summary of their rights under the FCRA
   • Notice that you’re considering adverse action
2. Waiting period: Allow the candidate reasonable time (typically 5-7 business days) to dispute inaccuracies or provide additional context.
3. Final adverse action notice: If proceeding with rejection, provide:
   • Notice that adverse action has been taken
   • Contact information for the background check company
   • Statement that the background check company didn’t make the decision
   • Notice of the candidate’s right to request an additional free copy of the report

Background Check Timing and Best Practices

When to Conduct Checks

The timing of background checks can significantly impact both compliance and candidate experience:

• After conditional offer: Most common and legally safest approach
• After interview: Common but may be restricted in some jurisdictions
• Before interview: Generally not recommended and potentially illegal in Ban the Box locations

For existing employees, consider:

• Periodic rescreening for sensitive positions (typically annually)
• Rescreening when employees change roles, especially if moving to positions with higher risk
• Implementing continuous monitoring for certain regulated industries

Communicating with Candidates

Transparent communication throughout the background check process can improve candidate experience and reduce drop-off:

• Explain your background check process during recruitment
• Provide clear timelines and expectations
• Promptly address questions or concerns
• Be respectful and professional when discussing concerning findings
• Offer candidates opportunities to provide context for negative information

Conclusion

Conducting thorough employee background checks is a vital step in building a reliable and trustworthy workforce. A well-structured screening process protects your organization, employees, and customers while ensuring you hire qualified candidates who align with your company’s values and goals. By following best practices—such as developing a consistent policy, complying with all regulations, choosing the right provider, and maintaining transparency—you can minimize risks and create a safe, productive work environment. Regularly reviewing and updating your process ensures ongoing compliance and effectiveness as laws and business needs evolve.

Partner with Sapphire Background Check to streamline your hiring process with accurate, compliant, and efficient screenings. Our expert team helps businesses like yours navigate background checks with confidence, ensuring you make informed hiring decisions. Start today and take the next step toward building a safer, more trustworthy workplace.

FAQs

What background check do most employers use?

Most employers use a combination of criminal background checks, employment verification, and education verification as their standard package, with criminal history searches being the most common element across industries.

What is the process of a background investigation?

A background investigation typically involves obtaining candidate consent, submitting their information to a background check provider, verifying employment and education history, conducting criminal record searches, and reviewing the compiled report to make an informed hiring decision.

Who fails an employment background check?

Candidates may fail a background check if they have serious criminal convictions relevant to the position, significant discrepancies in their employment or education claims, appear on industry exclusion lists, or have poor credit history for financial positions.

What happens after a background check?

After a background check, employers review the findings and either proceed with the hiring process for candidates who pass or initiate the adverse action process for those with concerning results, which includes providing pre-adverse action notice, allowing time for dispute, and sending final notice if the decision stands.