$30–$80
cost of a comprehensive pre-employment background check: versus the average $15,000+ cost of a bad hire that clears without one
FCRA
the Fair Credit Reporting Act governs every employer background check in the U.S.: non-compliance exposes employers to lawsuits and civil penalties up to $1,000 per violation
3–5 days
typical turnaround for a standard background check through a compliant third-party provider: faster than most employers expect
What a Background Check for Employees Actually Covers
A pre-employment background check is a third-party investigation of a job candidate’s history in categories that are relevant to the role. It is not a blanket investigation of everything about a person’s past: the Fair Credit Reporting Act (FCRA) strictly governs what can be checked, how it can be used, and what must happen before an employer can take adverse action based on the results. Understanding the legal framework is as important as understanding the practical process.
The specific checks that are appropriate depend on the role. A background check for a delivery driver reasonably includes a motor vehicle record (MVR) check. A check for someone handling financial transactions reasonably includes a credit history. A check for a childcare worker or someone working with vulnerable populations reasonably includes a sex offender registry search. Conducting checks that are not job-relevant and then using them in hiring decisions is a compliance risk that no small business needs to take on.
Warning: Running a background check without written consent is an FCRA violationBefore ordering any background check through a Consumer Reporting Agency (CRA), which includes all third-party background check providers, you must provide the candidate with a clear and conspicuous disclosure that a background check will be conducted, presented as a standalone document (not buried in an employment application), and obtain their written authorization. This is mandatory under the FCRA regardless of what state you are in. Proceeding without this consent exposes the business to FCRA civil liability of up to $1,000 per violation plus potential class-action risk.
Background Check Components: What to Run for Which Roles
| Check type | What it returns | Run for | Typical cost |
|---|---|---|---|
| Criminal history | Felony and misdemeanor convictions at county, state, and federal levels | All employees. Required for regulated industries | $15–$40 |
| Identity verification / SSN trace | Confirms identity. Surfaces aliases and address history for additional search jurisdictions | All employees (usually included in base check) | Included |
| Employment verification | Confirms dates, title, and sometimes reason for leaving at listed employers | All professional and managerial roles | $10–$20 per employer |
| Education verification | Confirms degrees, dates, and institution at listed schools | Roles where degree is a stated requirement | $10–$15 per institution |
| Motor vehicle record (MVR) | Driving history, license status, violations, suspensions | Any role involving driving a vehicle | $10–$15 |
| Credit history | Payment history, accounts, public records (bankruptcy, liens) | Finance, accounting, or cash-handling roles. Restricted by state law | $10–$20 |
“A background check does not tell you whether a candidate will succeed in the role: that is what interviewing and reference checking are for. What a background check does is surface factual discrepancies and relevant risk factors that a candidate had an opportunity to disclose and did not.”
Running a Compliant Employee Background Check: 5 Steps
- Use an FCRA-compliant Consumer Reporting Agency (CRA), not a DIY internet search. Free internet searches, social media reviews, and county court record websites are not substitutes for a formal background check through an accredited CRA. Only a CRA-conducted check complies with the FCRA’s dispute rights and accuracy requirements: which protect both the candidate and the employer. Widely used CRAs for small businesses include Checkr, Sterling, First Advantage, and HireRight. All offer FCRA-compliant workflows that handle the required disclosures, consent documentation, and adverse action procedures automatically.
- Provide the standalone disclosure and obtain written consent before ordering the check. Before initiating the check, give the candidate two documents: (1) a standalone written disclosure that a consumer report will be obtained for employment purposes, and (2) an authorization form for them to sign. The disclosure must be separate from the employment application: it cannot be embedded in the application or an offer letter. Obtain the signed authorization before the check is ordered. CRA platforms typically handle this workflow digitally, sending the disclosure and authorization to the candidate for e-signature.
- Define in advance what results are disqualifying. And which are not. Before reviewing background check results, document the criteria that will be used to evaluate them. A criminal record does not automatically disqualify a candidate under the FCRA: employers must conduct an individualized assessment considering the nature of the crime, how long ago it occurred, and whether it is directly relevant to the job duties. The Equal Employment Opportunity Commission (EEOC) has issued guidance specifically against blanket criminal record exclusion policies because they disproportionately impact protected classes. Have written criteria reviewed by a business attorney before running your first check.
- Follow the two-step adverse action process if you intend to disqualify based on the report. If background check results will cause you to not hire, rescind an offer, or take adverse employment action, the FCRA requires a two-step process. Step 1 (pre-adverse action): provide the candidate with a pre-adverse action notice, a copy of the background check report, and a copy of the FTC’s “A Summary of Your Rights Under the FCRA”: then allow at least 5 business days for the candidate to dispute any inaccurate information. Step 2 (adverse action): if you proceed with the decision after the waiting period, provide a final adverse action notice. Skipping either step creates FCRA liability.
- Maintain background check records separately from the general employment file. Background check reports and any related notes should be stored in a separate, confidential file: not in the general personnel file. Access should be restricted to HR personnel and hiring managers involved in the decision. Retain records for a minimum of 5 years (some states require longer). Do not share background check results with supervisors who were not part of the hiring decision. Commingling background check records with general employment records creates both privacy exposure and legal risk if the file is ever requested in litigation.
Tip: Run the background check after a conditional offer, not beforeBest practice, and the law in an increasing number of states and cities under “ban the box” legislation, is to make a conditional offer of employment before running the background check, not as a prerequisite for the offer. This is both more fair to candidates and reduces legal risk for employers by ensuring the hiring decision is based on qualifications first and the background check only surfaces disqualifying information as a secondary review. Check your state and city’s ban-the-box rules before designing your hiring process: over 35 states and 150+ cities have enacted some form of this restriction.
Building the complete hiring process around your background check workflow?
