Fair Credit Reporting Act

• Employers are required to obtain permission before obtaining a background check. This is usually done prior to employment and as a condition to employment. The employer must notify the employee prior to making an adverse employment decision if the background report was used to inform that decision. With that notice, the employer must give the employee a copy of that background check. Adverse actions include hiring and firing decisions, as well as retention and promotion considerations.
  
  

Negligent Hiring

• If an employee harms a coworker, customer or other third party, the employer may face a lawsuit for negligent hiring or negligent retention. One way in which employers defend against such causes of action is to show that they have performed a relevant background check. Employers must show that they acted as a reasonably prudent employer would in such situations. For this reason, employers regularly conduct background checks to prevent such lawsuits, even when the check isn't legally required.
  
  

Evidence

• In court, it may not be adequate simply to state that you have performed a background check. An employee sued for negligent hiring may be aided by retaining a copy of that background investigation or having a document handy that references when the investigation was ordered.
  
  

Privacy Rights

• Firms typically buy background investigations from powerful database companies that may provide credit information, lawsuit or divorce records and criminal checks. The results of background investigations can implicate privacy rights. For this reason, the Texas Workforce Commission advises employers to keep the results of all background investigations in a file that is separate from the regular personnel file. Such a policy prevents a low-level human resources employee or mid-level manager considering promoting a worker from seeing potentially embarrassing information when reviewing an employee's general personnel file. This practice preserves evidence of a check when it is needed, but helps employees maintain some semblance of privacy.
  
  

Policies

• Whether an employer retains background checks in a personnel file or not, it is important for that entity to spell out its practices in a clear policy. Under the University of Texas at Tyler's policy, for example, employees are subject to background checks for sensitive positions. But the university disposes of the results after an employee has completed a probationary period or after 180 days if there is no probationary period.