Conducting Background Investigations and Reference Checks

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Conducting Background Investigations and Reference Checks 



Background investigations and reference checks are two different approaches to screening applicants for job openings. 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, educators and athletic coaches to verify previous employment and to obtain information about the individual’s knowledge, skills, abilities (KSAs) and character.  

There are numerous reasons employers should perform at least some level of background investigation or reference check with respect to every new hire. The extent of the inquiry will depend upon the nature of the business, the job at issue and perceptions of risk.

Human resource professionals face many practical challenges and potential legal pitfalls in conducting background investigations and reference checks, regardless of whether they are done in-house or by an outside vendor. The challenges vary depending on the type and depth of inquiry, as well as the federal, state and international laws that may apply.

Human resource professionals responsible for pre-employment screening have access to various tools to help them research and select background-screening partners. Weigh All Options on Outsourcing Screening Functions and RFP Proposal Guide.

Reasons to Conduct

There are many reasons employers should conduct an appropriate level of screening for prospective employees through a background investigation, a reference check or both. SeeWhat You Don’t Know Can Hurt You.

Avoiding injury. 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—for example, harm to:

  • The employer’s business through embezzlement or image and reputational issues.

  • 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.

Litigation defense. Defense of legal claims—negligent hiring and retention, for example—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. See Due Diligence in Screening: No Room for Shortcuts.

Maximize productivity. Hire the best and reject the rest, the saying goes. Typically, past performance is a strong indicator of future performance and can reveal an individual’s professionalism, productivity, job skills and interpersonal communication abilities. A background check helps to distinguish between a true high flier and a mere poser. Nearly half of more than 3,100 hiring managers report catching a job candidate lying on a résumé, according to a survey.


A variety of developments and trends in society at large are reflected in trends associated with background screening and reference checks.

Frequency of use

Polls conducted by SHRM and other organizations reveal a trend toward greater use of background investigations and reference checks in employment. This trend is driven by several factors, including:

  • Security issues in a “post-9/11 world.”

  • New legislation, particularly in the area of immigration law enforcement.

  • Technological advances that make background investigations faster and more economical.

  • Increased awareness of the various risks of failure to conduct adequate background checks.

  • A rise in the willingness of applicants to misrepresent their credentials.

  • Increasing competition among applicants due to the dearth of new jobs in a recessionary environment.

 Types of findings

According to a survey, industries that appear to encounter fraudulent résumés most often are:

  • Hospitality (60%).

  • Transportation/utilities (59%).

  • Information technology (57%).

Government had the lowest incidence, at 45%.

As more companies step up their pre-employment screening practices, the percentage of criminal record convictions flagged continues to trend upward, increasing to 9.5% in 2007—compared with 9.1% in 2006 and 8.5% in 2005—according to the 2008 Hit Ratio Report, released annually by the background screening division of the risk consulting firm Kroll. Industries with the highest criminal record hit ratios were:

  • Construction (15.4%).

  • Automotive (13.9%).

  • Retail (13.7%).

Red flags identifying criminal records also grew in the manufacturing sector from 11.6% in 2006 to 12.6% in 2007, and in the food services sector from 12.1% in 2006 to 13.4% in 2007.  Education (3.7%) had the lowest red-flag ratio. See:


In addition to phone-based reference interviews, more screening firms and employers are using technology to improve the results of reference checks. Some firms offer web-based solutions that enable a broad set of reference sources to respond quickly and confidentially. Others believe that web-enabled reference checking does not enable a hiring manager or screening professional to ask probing questions in an interactive fashion. While this is true, requesters always have the ability to call and ask follow-up questions about candidates after reading the initial report. See:


Pre-employment screening is becoming more complex as companies are looking more to overseas job markets. According to the risk consulting firm Kroll, it is now common for a job applicant to have been raised in one country, educated in a second and seeking employment in a third. As a result, employers are carefully vetting candidates for entry-level jobs, senior management and positions in between. Organizations recognize that candidate screening at all levels is more complex and vital to organizational well-being . See, Companies See Higher Screening Hit Ratios With Global Job Market Expansion. Multi-national employers must be careful to obey local laws concerning background checks.

Internet fraud (aka ‘Phishing’)

Be leery of web sites claiming that they will provide instant access to information after opening and activating an account using a credit card number. Web sites that do not provide contact information allowing for the ability to converse with a representative should be considered suspect. See, Due Diligence in Screening: No Room for Shortcuts.

Nontraditional approaches

1.   In a survey of more than 300 human resource professionals, nearly half said they are using search engines such as Google and Yahoo to review online information posted by job candidates. Far fewer, about 15%, are using social networking sites like Facebook, MySpace and LinkedIn to do the screening. See, Background Investigations. This is a controversial approach. On one hand, it would be hard to defend a company that did not avail itself of free and publicly available information that might have prevented a hiring disaster. On the other hand, employers using such means of background checking must recognize the limitations of the medium. See, Using Internet Information to Screen Job Candidates Not Advised.

 Practical Challenges

Human resource professionals face a variety of practical challenges when conducting background investigations and reference checks.

With respect to background investigations, the challenges include:

  • Selecting a vendor. See, Seven ‘C-crets’ for Selecting a Screening Firm.

  • Limited access to criminal records and mistaken identity.

  • Obtaining cooperation of third parties.

  • Obtaining enough—but not too much—information.

  • Obtaining reliable information.

  • Creating a record of the background checking process.

  • Evaluating the information obtained in a nondiscriminatory fashion.

  • Retaining background checking records for the time required by law.

The personal reference check may be one of the most insightful background screens, but it can be one of the most difficult to obtain. Whether done in-house or through an outside vendor, well-thought-out and executed reference-checking practices yield the most valuable information about what to expect from job candidates—that is, much more than just an applicant’s “name, rank and serial number.” See, Personal Reference Checks Valuable, But Require Extra Care.

Aspects of Background Investigation

“Background investigation” is a generic term that may encompass research into one or more types of information about a job candidate. Employers will want to inquire into different aspects of an individual’s background in different situations. See:

Timing. Conducting a background check can take 48 hours or less—or it may take as much as a week. If there is great pressure to fill a position, the better course of action is to run background checks on the two or three finalists rather than on a single candidate who has received a contingent offer. Investigating only the final candidate may seem to be most cost-effective, however, that approach runs the risk of having to rescind an offer and start from square one if the results are unsatisfactory. See, Can an employer conduct a background check before extending an offer of employment?

Having a clean background check on file for a new hire may be sufficient in the short run, but many employers are realizing that post-hire or reoccurring background screening should be conducted at regular intervals for certain job categories or employment situations. See, Beyond Pre-Hire Background Checks: Post-Hire Screens Become the Norm and SHRM Poll on Post-Hire Background Checking Practices.

Eligibility for employment in the United States. While not a background check in the commonly understood sense, the process of verifying an individual’s eligibility to work in the United States is a type of employee screening that should be addressed in this context. Employers must complete a Form I-9 for all newly hired employees to verify their identity and authorization to work in the United States. See, Atty Krishna McVey, SPHR, Discusses Best Practices, Risks in I-9 Compliance and SHRM Poll on Employment Eligibility Verification (I-9) Practices.

1.  The types of acceptable identity and employment authorization documents employers can accept from new hires change periodically.  The link to the current acceptable documents is at Form I-9, Employment Eligibility Verification


Employers have several electronic options for verifying their workers’ names and Social Security numbers (SSN) and validating work eligibility. See, Electronic Verification Tools and Scott Mezistrano of American Payroll Ass’n Discusses Best Practices in Online Verification of Employment Eligibility.

While use of E-verify—the U.S. government’s online system for verifying employment eligibility—is voluntary for most employers, an executive order requires all federal contractors to use the system to confirm the legal status of their employees or risk losing their government contracts. See, Federal Agencies Expanding E-Verify to Contractors, Suppliers.  Some state governments have also passed laws requiring employers to use E-verify.

Employment history. Some people include false employment history on their résumés; it’s that simple. Employers frequently discover lies embellishing job responsibilities. Other frequent falsehoods involve skill set, dates of employment, academic degrees, previous employers and job titles and roles.

Education history. Listing academic degrees never obtained or educational institutions never attended are also common résumé falsehoods.  One high-profile case involved the admissions dean for the Massachusetts Institute of Technology, who resigned after it came to light that she had claimed three degrees she did not actually have (2007).   A former CEO of RadioShack resigned after executives discovered that he had falsely claimed to have received two degrees from a college in California (2006).

Criminal convictions. Increased use of criminal background checks by employers to prescreen job applicants stems from the growth of claims alleging that an employer was negligent in hiring or retaining an employee who subsequently engaged in workplace violence or some other act that resulted in harm to a person (for example, sexual assault) or property (for example, theft). Many companies also perform criminal background checks on current employees, either as a matter of course or prior to a promotion, transfer or other change in the terms and conditions of employment. See:

Generally, it is not cost-effective for employers to perform criminal background checks in-house. The result has been the emergence of third-party service providers whose business is to conduct background screening for employers. These providers, as a rule, are better equipped to conduct thorough and accurate background screening, assuming they adhere to certain guidelines and practices. See, Criminal Background Checks for Employment Purposes.

Motor vehicle records. It is critical to check the driving record of any individual who will operate a company vehicle at any time or who will drive personal or rental vehicles on company business. A motor vehicle record will typically list license status, license class, expiration date, traffic violations, arrests and convictions for driving under the influence, and license suspensions or cancellations. See, Sample Motor Vehicle Driving Record Check Policy.

Specific industry mandates. For some jobs, federal or state law requires a background investigation. For example, in 2007, the DHS issued an interim final rule that requires chemical plants to conduct background checks of current and future employees and contractors that have unescorted access to the facilities. New Jersey has enacted similar legislation. See, Certain Independent Contractors Must Conduct Background Checks.

Consumer credit reports. Credit reports are frequently sought for candidates applying for positions that involve financial responsibility. Such a report helps an employer ascertain whether the applicant’s financial status might pose a risk in a position involving handling money or exercising financial discretion. Credit reports should be used with discretion since many EEOC and state laws now prohibit their use where an employer cannot present a compelling business rationale for such reports.   Quite simply, they should be reserved for where positions merit credit scrutiny.

Types of Reference Checks

Different types of reference checking are warranted in different situations. For a great deal of practical and benchmarking information, see, Getting to Know the Candidate: Conducting Reference Checks. See also:

Verify employment. Contact previous employers to verify:

  • Dates of employment.

  • Job title.

  • Duties performed.

  • Circumstances of separation.

  • Compensation.

See, Sample Employment Verification Request Form and Employment Verification Form.

Determine qualifications. Contact previous employers (including supervisors and co-workers) to determine:

  • Pertinent knowledge of applicants.

  • Pertinent skills of applicants.

  • Pertinent abilities of applicants.

  • Character of applicants.

Verify authenticity of reference letters. It is easy to create a fake reference letter—company logo and all. Accordingly, generic letters of reference—especially “stale” ones or ones from non-employers—have relatively little value and should be scrutinized carefully before relying on them whatsoever. One way to check their authenticity is to look up the author’s telephone number in another source and call the person directly.

Legal Challenges in Conducting Background Investigations

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

Federal law

A number of federal laws explicitly or implicitly apply to the practice of background investigation.

Fair Credit Reporting Act (FCRA). FCRA regulates the use of consumer credit reports and investigative consumer reports. 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 notifications for this type of inquiry, required under the FCRA, should be done before requesting a credit report.

For information on how to comply with the FCRA, see:

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

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

Immigration Reform and Control Act of 1986 (IRCA). IRCA prohibits discrimination on the basis of national origin or citizenship, except for undocumented aliens, for employers that have four or more employees. See, Victor Cerda, Formerly of Immigration and Customs Enforcement (ICE), Discusses Increased Penalties for Hiring Illegal Aliens.

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.

  • Using criminal history in employee selection.

  • Safeguarding information.

  • Retaining records.

  • Blacklisting.

Common law

A number of common law claims can arise against an organization as a result of a background investigation gone wrong, including:

  • Negligent hiring.

  • Invasion of privacy.

  • Defamation.

  • Tortious interference with present employment.

  • Tortious interference with future employment.

However, a substantial majority of states now have laws that provide some level of statutory immunity to persons providing employment references. See, Implications of the Job Reference Immunity Statutes.

Legal Challenges in Conducting Reference Checks

Human resource professionals must be cognizant of a variety of legal issues involved in conducting reference checks. For example, employers should not solicit information from references that, in light of both federal and state equal employment opportunity laws, cannot be legally solicited from the applicants themselves.


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