Why are background checks so important?
With employee-related risks like insider threats and theft on the rise, pre-employment background checks are more important than ever. Studies show that organizations are much more likely to experience insider attacks from employees than external attacks. In fact, an IBM report found that 66% of attacks against companies come from the inside.
So, what exactly constitutes a “red flag” on a background check? Red flags are indicators of potential issues that could negatively impact a company. These can range from minor inconsistencies to serious criminal offenses. The Association of Certified Fraud Examiners (ACFE) estimates that U.S. organizations lose 5% of their revenue to fraud each year. That’s a lot of money!
This article provides an overview of common red flags on background checks and offers guidance on how to address them appropriately.
Understanding the Purpose and Scope of Background Checks
If you’re applying for a job, you’re probably aware that employers often run background checks on potential hires. But what’s the point of these checks, and what exactly are employers looking for?
Why Companies Conduct Background Checks
Companies conduct background checks to:
- Mitigate risk. They want to identify possible threats to workplace safety, security, and financial stability. They also want to show they’ve done their homework in the hiring process, to avoid lawsuits for negligent hiring.
- Improve hiring outcomes. Employers want to make sure they’re hiring honest, reliable people. Background checks can enhance workplace safety, reduce the risk of workplace violence, and ensure compliance with industry regulations and legal requirements.
Scope of Background Checks
A typical background check might include:
- Verification of your employment history
- Criminal record checks
- Credit history checks (if the job involves handling money)
- Verification of your education
- Reference checks
- Drug screening
- Driving record checks (if the job requires driving)
Common Red Flags Related to Candidate Identity and Integrity
When a company is running a background check, there are a few things that will raise concerns. These are often related to a candidate’s identity and overall integrity.
Discrepancies in Information
Does the information on your application and resume match what the background check turns up? If not, that’s a problem.
Even something as simple as getting the dates of employment wrong, misstating a job title, or exaggerating your educational qualifications can raise questions in the mind of a potential employer. In fact, some research suggests that more than 75% of people have lied on their resumes.
Even minor discrepancies can suggest dishonesty or a lack of attention to detail. More serious differences may point to an attempt to hide something unfavorable.
Employment History Gaps
Everyone has periods of unemployment, but lengthy gaps without explanation can be a red flag.
If your background check comes back with extended periods of unemployment, you may be asked to provide a reasonable explanation. The employer may also want to verify your explanation with previous employers or other sources.
Short Tenures at Previous Jobs
Do you change jobs frequently? If so, that may be a concern.
While it’s perfectly acceptable to have short jobs or contract work here and there, a pattern of changing jobs every few months can suggest a lack of commitment, poor performance, or a difficulty in working with others.
Financial and Legal Red Flags
Background checks often turn up financial or legal issues that make an employer think twice about hiring someone. Here are a few of the most common:
Criminal Records
Certain criminal records are more alarming than others. For instance, if you’re applying for a job as a cashier, a theft conviction is going to raise some eyebrows. Employers also tend to be concerned about convictions for violent crimes or anything that suggests you might not be trustworthy.
It’s important to remember that not all criminal records are disqualifying. Employers are supposed to consider the nature of the offense, how long ago it occurred, and how it relates to the job you’re seeking.
Suspicious Credit History
A potential employee’s credit history becomes relevant when the job involves handling money or sensitive financial information. A 2023 article by SHRM found that roughly 16% of employers run credit reports on job candidates. Another source indicates that more than half of employee background screenings in the U.S. include credit and financial checks.
An employer might see excessive debt, bankruptcies, or a history of financial mismanagement as red flags, since those things can indicate irresponsibility or make a person vulnerable to bribery or theft.
Poor Driving Record
If the job requires driving, such as commercial drivers, delivery personnel, or anyone who drives frequently as part of their job, a poor driving record is a major concern.
Multiple traffic violations, DUI convictions, or license suspensions can indicate a disregard for safety and traffic laws.
Behavioral and Performance-Related Red Flags
Beyond criminal records and credit history, background checks can also reveal potential issues related to a candidate’s behavior and past job performance.
Negative References
If previous employers offer unfavorable comments about a candidate’s work ethic, performance, or interpersonal skills, that’s a definite red flag. It’s worth digging deeper to look for recurring themes or patterns in the feedback. Also, consider who’s giving the reference and whether they might have any biases.
Failed Drug Screening
A failed drug test can suggest substance abuse or a lack of respect for company policies. This is particularly concerning in industries where safety is paramount, such as transportation or construction.
Refusal to Undergo a Background Check
When a candidate refuses to allow a background check, it immediately raises suspicion. What are they trying to hide? According to one source, “78% of job seekers admitted to either lying during the hiring process or would consider lying to get a job.”
If a candidate balks at a background check, explain its importance and the company’s policy. If they still refuse, it may be best to withdraw the job offer.
Navigating Red Flags: Due Diligence and Legal Compliance
When you spot a potential red flag on a background check, it’s important to proceed with caution and fairness. You can’t just assume the worst.
Individual Considerations and Context
Each person’s situation is unique, so consider the individual circumstances around the negative findings in the background check. Jumping to conclusions based solely on the results isn’t fair or accurate.
It’s a good idea to give the candidate a chance to explain any red flags and provide more information. There may be a perfectly reasonable explanation.
The Fair Credit Reporting Act (FCRA) and Adverse Action
The FCRA has specific rules you must follow when conducting background checks:
- Get the candidate’s explicit consent before you run a background check.
- Make sure the background check information is accurate.
If you’re thinking of taking “adverse action” (like not hiring someone) based on the background check, you need to provide the candidate with a “pre-adverse action notice” and give them time to dispute the results. You must follow all the proper legal procedures.
Partnering with Reputable Background Check Services
Using a professional background check service can be a smart move. These services have expertise in conducting thorough and accurate checks and can help you stay compliant with the FCRA and other legal requirements. They also have access to a wide range of screening tools and resources.
In Summary
Certain things on a background check, like a criminal record, discrepancies in employment history, or a poor credit history, can raise serious concerns for employers. Identifying and addressing these red flags is essential to reducing risk and protecting your company’s assets and reputation.
Because employee risks are always changing, comprehensive background checks performed in compliance with all applicable laws are an ongoing need. Accurate background checks are essential to minimizing legal liabilities from negligent hiring practices.
Smart companies view background checks as a strategic imperative and an investment in their long-term success and security. By implementing robust screening procedures, you can make sure you’re only hiring people who will contribute positively to your organization.