4 New Laws and Regulations That Can Curb Background Checks

Posted by on July 26, 2012 in Employee Background Checks [ 3 Comments ]

This year has been one of progress for the background check industry – in fact, this is the first time in more than 20 years, since 1990, that the industry has updated their regulations.

When it comes to conducting criminal record checks on your current employees or job applicants, you may no longer be able to inquire about or gather information about certain background check elements, including court records, arrest records, and credit checks.

The Equal Employment Opportunity Commission (EEOC) has communicated a handful of new or clarified guidelines, including those we outline below. Keep these four new standards in mind when you inquire about your next new hire’s background:

1. Court Record Restrictions

The new regulation: In the state of Indiana, a new bill restricts criminal history reporting in background checks by blocking certain types of criminal history information from being obtained.

This bill also means that Indiana residents with restricted or sealed criminal records can reply “no” to the question of whether they’ve been arrested or convicted of the offense recorded in their sealed record. A record could be sealed for any number of reasons, including:

  • It was a juvenile criminal record or involved juveniles in some way
  • The case involved witness protection information
  • It involved trade secrets or state secrets

How it impacts your effort to screen employees: For Indiana companies, you now cannot ask an employee or applicant about the information contained in sealed or restricted criminal records. Further, you cannot expect a consumer reporting agency (known as a CRA) to divulge information regarding cases where your applicant wasn’t prosecuted, the action against him or her was dismissed, it was ruled that he or she didn’t commit the infraction, or the applicant was convicted, but satisfied any judgment attendant more than five years ago.

2. Blanket Criminal Record Policies

The new regulation: We’ve previously covered the recent clarifications made by the EEOC that maintains you must not disqualify job applicants simply because they have a criminal record. This can be seen as discrimination; you may be disproportionately excluding black and Hispanic applicants from permanent jobs, since they are 2 to 3 times more likely to be arrested and jailed than the general population.

How it impacts your effort to screen employees: If your applicant has a criminal record, you can’t simply dismiss them as a job candidate. To do so is too broad of a sweep to take when you’re screening a new hire, and you instead need to give them the opportunity to explain the infraction, and suggest reasons why they shouldn’t be disqualified. This isn’t a suggestion, but rather these new standards require it.

It’s also recommended that your small business take the time to draft a policy that outlines exactly how you plan to use criminal histories in your background checks. Doing so may keep you in the clear if you’re challenged by an applicant who suggests, with the help of a lawyer, that they were not hired because of their criminal history. The new EEOC guidelines suggest your policy include individual assessment of each situation: meaning you’ve considered the nature of the crime, the time that has gone by since it happened, and how this information affects the nature of the job you’re hiring for.

3. Arrest Records in Background Searches

The new regulation: According to the EEOC, the fact that someone was arrested with no context around the conviction (or lack thereof) is no indication of criminal activity. Arrest records are often incomplete, and are not the same thing as a criminal conviction.

How it impacts your effort to screen employees: While you might consider the type of behavior that led to the arrest, you shouldn’t solely use this situation as a reason not to hire someone. Just as you would with someone who has a criminal record, request more information about any particular arrest that alarms you. When given your job applicant’s official statement about the situation, use this to make an informed decision as to whether or not the behavior that led to the arrest is relevant to the type of work this person might do, and whether or not it would be a considerable risk to place this person among the rest of your workforce.

4. Credit Report Limitations

The new restriction: Many states have begun limited the use of credit reports by employers for screening out new hires. This law is being enacted in order to prohibit discrimination against individuals based on their credit history. This is particularly relevant after the recession we are still climbing out of. Many consumers took significant financial hits because of job loss, underemployment, mortgage rates, and excessive debt. When this information is reflected on their credit history, it may keep a disproportionate number of job applicants from looking like viable candidates.

However, employers ARE allowed to use credit information if they meet at least one of these circumstances:

  • The position you are hiring for involves access to confidential financial information.
  • The employer is a bank, credit union, or other financial institution.
  • The position in question is a law enforcement officer, emergency medical personnel, or a firefighter.
  • The position of employment requires a financial responsibility to the employer or a customer. Responsibilities might include authority to issue payments, collect debts, transfer money, or oversee contracts.
  • The employer can demonstrate that the information is a valid and reliable predictor of employee performance in the specific position of employment.
  • The position of employment involves access to an employer’s payroll.

How it impacts your effort to screen employees: While it’s only a law in the states of California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Washington and Vermont, you might also consider not using credit reports or credit histories to make employment decisions when it comes to job applicants (except where described above or if it’s state law). Part of the law passed also says that, even if you attest to one of the circumstances listed above, you can’t use this information as the ONLY reason not to hire someone.

Photo source: examiner.com


3 thoughts on “4 New Laws and Regulations That Can Curb Background Checks


  1. avatarMike Hogan

    If our company was to perform a back ground check on a candidate for a position in the state of Indiana. Would we be able to see anything beyond a conviction? I.E …an arrest record or an arrest record with a case dismissed, etc.? Would those items be on a background report?
    Thank you
    Mike Hogan



  2. avatarSusannah

    Greetings! Very useful advice within this article! It is the little
    changes which will make the greatest changes.
    Many thanks for sharing!

    Alcanzas proporcionar mucho m


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