Small businesses face pressures in today’s competitive labor market to quickly find and hire the right people.
However, you still need to take steps to ensure that potential hires are qualified, trustworthy, and competent.
Small business background checks help protect the safety of your customers, employees, and your business reputation.
At iprospectcheck, we regularly conduct background checks across the U.S. and have written this guide as a resource for business owners.
Key Takeaways
- A small business background check investigates a candidate’s criminal history, employment, education, professional license, driving record, and other relevant details to ensure they are qualified, trustworthy, and safe.
- What shows up on a background check varies, but most small businesses request criminal history, employment verification, education verification, professional license verification, identity verification, reference checks, and motor vehicle records.
- Small businesses must comply with state and federal laws when conducting background checks.
What is a Small Business Background Check?
A small business background check is an investigation employers conduct into a candidate’s personal history, including criminal records, past employment, education, professional license, motor vehicle records, and other key details.
Business owners conduct these checks to confirm the claims candidates make on their resumes or applications, ensure they have the experience and qualifications to perform their jobs and protect the safety of their employees, vendors, and customers.
Why are Background Checks Important for Small Businesses?
Background checks for small businesses are important for the following reasons.
1. Mitigate risks of employee theft and fraud
Background checks show whether an applicant has a criminal record.
This helps businesses screen out candidates who have previous theft convictions, thereby reducing the risk of internal thefts.
According to the Association of Certified Fraud Examiner’s 2022 Report to the Nations, businesses with the fewest employees in 2021 reported the highest median losses from internal thefts and fraud of $150,000.
While a large corporation might be better equipped to absorb losses caused by employee thefts, these types of losses can force small businesses to close.
2. Ensure candidates are qualified for their jobs
Background checks show whether an applicant has the qualifications and experience needed for their jobs.
Hiring an unqualified applicant could result in productivity issues and potential liability.
3. Avoid substantial expenses caused by hiring the wrong people
Hiring the wrong people for your open positions can lead to higher turnover rates and costs associated with getting new hires up to speed.
4. Maintain a safe work environment
Comprehensive pre-employment screens provide insight into whether an applicant exercises safety or if they tend to be careless.
Hiring careful applicants can help to protect the safety of your work environment
5. Reduce liability risks
Background checks can reduce the risk of lawsuits filed against your business for negligent hiring or retention of an incompetent or unsafe employee.
What Shows up on a Small Business Background Check?
What shows up on a small business background check varies based on the industry in which you operate.
However, most small businesses ask for the following types of searches:
- Criminal history
- Employment verification
- Education verification
- Pre-employment drug tests
- Professional license verification if applicable
- Identity verification
Let’s take a look at what might appear on a few of these types of reports.
Criminal History
A criminal background check for employment shows whether an applicant has a criminal conviction or a pending criminal matter.
If an applicant has a criminal history, the following information will appear:
- Offense date
- Nature of offense
- Severity of offense (felony/misdemeanor)
- Disposition if available
- Disposition date if available
- Sentence information if available
If your business is located in a state that allows people to expunge certain criminal convictions from their records, you won’t see information about expunged convictions.
Employment Verification
Employment verification helps you confirm what an applicant has reported about their former jobs.
Employment verification reveals the following information about each of an applicant’s past jobs:
- Employer’s name and address
- Dates of employment
- Job titles and positions
Education Verification
Education verification confirms whether an applicant has been honest about their educational attainment.
On an education verification check, you will see the following information:
- School names/addresses
- Dates of attendance
- Whether any diplomas, degrees, or certificates were conferred
Professional License Verification
Businesses that hire employees for jobs requiring licenses typically request professional license verification as a part of their background checks.
Professional license verification reveals the following information:
- Type of license
- Issuance date
- License status
- Expiration date
- Discipline/sanctions against the license
- Suspensions or revocations
MVR Checks
Businesses that hire drivers request motor vehicle records (MVR) checks, which show the following details about an applicant’s driver’s license and record:
- License number
- Issuance date
- License class
- Licensee’s full legal name
- Registered address
- Traffic infractions
- Major traffic offenses
- Revocations or suspensions
- Expiration date
Identity Verification
Identity verification is an initial search consumer reporting agencies (CRAs) perform to confirm an applicant is who they claim to be, verify that uncovered records belong to the applicant and not a similarly named individual and identify other jurisdictions that should be searched for information.
Legal Compliance
It’s both important to conduct employment background checks and to understand the laws that govern them.
Violating background check laws could expose your company to substantial penalties and potential liability.
Federal Background Check Laws
Fair Credit Reporting Act (FCRA)
The FCRA is a consumer privacy law that controls both how consumer reporting agencies (CRAs) can collect, retain, and report information and what the recipients of the information can do with it.
This law governs both background check providers and employers who receive background check reports.
If you receive a background check report that contains negative information about an applicant, you must go through the adverse action process before you can base an adverse employment decision on the information contained in the report.
Title VII of the Civil Rights Act of 1964 (Title VII)
Title VII of the 1964 Civil Rights Act prohibits employers from discriminating against applicants and employees based on their protected status.
The Equal Employment Opportunity Commission (EEOC) enforces this law. The agency has issued guidance about what employers should do when a background check report reveals an applicant’s arrest or criminal conviction.
If you learn that an applicant has a criminal record, you must assess the conviction as it relates to the job for which the applicant is being considered before deciding not to hire them.
Fair Chance to Compete for Jobs Act
The Fair Chance to Compete for Jobs Act (FCA) is a federal ban-the-box law that applies to federal agencies and companies that have or seek federal contracts.
This law prohibits federal contractors and agencies from asking about criminal history information before they make conditional job offers.
Under the FCA, federal agencies can’t contract with companies that inquire about criminal history earlier in the hiring process.
State Background Check Laws
Many states have laws that govern background checks. These laws vary, so you will need to consult your legal counsel to learn about the laws that might apply in your state.
A growing number of states and cities have passed ban-the-box laws. These laws govern the point during the hiring process when you can ask about criminal history information and/or conduct background checks.
Know Before You Hire
How to Conduct Background Checks for Your Small Business
1. Create a Background Check Policy
If you intend to conduct background checks at your small business, you need to have a written background check policy in place.
Creating a policy for background checks helps to ensure that your business will maintain consistency and fairness in the process.
Make Your Policy Apply Company-Wide
Your policy should apply company-wide at your business, and it should be applied consistently to all applicants.
Ensure Your Policy Complies With All Relevant Laws
You should also make sure that your policy complies with all relevant state and federal laws, and you should regularly review and update the policy so that it accurately reflects legal changes.
List the Types of Background Checks and Who Will Undergo Them
Include a list of the types of background checks you will conduct on applicants and/or current employees.
Make sure your background check policy only includes the types of background checks that are legally authorized in your state.
It should also address when in the hiring process they will be conducted and who will undergo them.
Include the Responsibilities of the Hiring Managers
Make sure you list the responsibilities of your hiring managers, including the need to disclose your intent to conduct background checks and obtain written consent from your applicants or employees before they are conducted.
Provide Copies to Everyone
Once you have drafted a background check policy, make certain that everyone in your business receives a copy so that they understand your requirements.
2. Train Hiring Managers
Train your HR staff who will conduct background checks.
Make sure they know the laws and their responsibilities at each phase of the process.
3. Choose the Right Provider
Choose a reliable background check company like iprospectcheck to ensure you receive accurate, legally compliant reports.
We have extensive access to reliable information sources and leverage advanced research methods to return current, accurate, FCRA-compliant results to our clients quickly.
4. Comply with Notice and Consent Rules
The FCRA’s notice and consent rules require employers to disclose they conduct background checks on a standalone form to make the notice more conspicuous.
You must also obtain your applicant’s signed consent before you can initiate a background check.
5. Time Background Checks Strategically
Many state and local jurisdictions have enacted ban-the-box laws and policies that control when you can ask about criminal history or inquire into a candidate’s criminal record.
Regardless of whether you operate in a jurisdiction with a ban-the-box law, it makes sense to wait until after you have narrowed down your candidates to a couple of finalists or after you have extended a conditional job offer.
Waiting until late in the hiring process to conduct background checks saves your company time and money.
6. Carefully Review and Communicate Results
Once you receive your reports, review them to assess your candidate’s job suitability and qualifications.
Contact the candidate if you decide to move forward with employment.
If you are concerned by the results, take the following steps before talking to the candidate.
7. Individually Assess Convictions
Avoid a policy of treating convictions as an automatic bar to employment.
Individually assess a conviction as it relates to the position’s duties and workplace safety before deciding not to hire the applicant because of their criminal record.
8. Complete the Adverse Action Process if Necessary
If you decide not to hire an applicant because of information in a background check, you must complete the adverse action steps:
- Send a pre-adverse action notice to the candidate with a copy of the background check report that contains the concerning information.
- Give the applicant a reasonable response time (typically five business days). They can respond with evidence the information is wrong or that they have been rehabilitated.
- Send a final adverse action notice to the candidate if you make a final decision not to hire them. Include a copy of their FCRA rights.
iprospectcheck Is Your Trusted Partner for Small Business Background Checks
Small business background checks can help you make smarter hiring decisions and protect your employees, customers, and brand.
At iprospectcheck, we provide tailored packages for small businesses at affordable prices.
To learn more about our services or receive a free quote, call us today: (888) 509-1979
DISCLAIMER: The resources provided here are for educational purposes only and do not constitute legal advice. Consult your counsel if you have legal questions related to your specific practices and compliance with applicable laws.
FAQ
How can I choose the best background check provider?
The best background check service for small businesses should have several key characteristics.
Here are some of the factors to look for in a background check provider.
1. Fast Turnaround Times
A good background screening partner should offer fast turnaround times so that you can onboard quickly.
At iprospectcheck, we provide fast reports to our clients so that you can hire the talent you need quickly in a tight labor market.
2. Accuracy
The best background provider for your business should provide information you can trust.
A background screening provider’s accuracy can help you make confident hiring decisions and protect you against potential liability.
3. Affordability
When you are searching for the right background check partner, you will appreciate iprospectcheck’s affordable pricing.
With us, you can pick only the reports you need so that you don’t have to pay for unnecessary reports.
4. Compliance
The best background check company should stay up to date with all changes in the laws as they occur so that they can remain compliant.
We remain current will all changes when they happen to ensure that our reports are always legally compliant.
5. Comprehensive
When you choose a background screening company, you should look for one that offers comprehensive services.
At iprospectcheck, we offer many types of background checks and other services you might need, including drug screening.
6. USA-Based Customer Support
Your background check provider should have USA-based support.
This allows you to speak to someone quickly instead of having to jump through hoops just to get help.
7. Data security
When you order background checks, the provider you choose must have strong data security to protect the safety of your private information and that of your applicants.
At iprospectcheck, we use the highest level of encryption technology to keep your information safe.
