Bringing on a new employee is one of the more vulnerable moments in running a business. You're trying to make the right call, choose someone trustworthy, and find a person who fits your culture, often without ever having worked alongside them. Pre-employment background checks can offer some peace of mind during that process, and most employers now rely on them: 96.1% of employers perform some form of preemployment background screening, and 86% specifically screen for criminal records at the pre-employment stage.
Background checks sit inside a web of federal, state, and local laws, and a misstep can turn a routine hiring step into a legal liability. Regulators are still actively enforcing these rules today: in October 2024, the Consumer Financial Protection Bureau issued a circular specifically addressing how background dossiers and algorithmic hiring scores are treated as consumer reports under federal law, and the EEOC continues to file lawsuits against employers over background check practices. Here are four of the most common mistakes employers make when conducting background checks, and how to avoid each one.
Background dossiers, algorithmic hiring scores, and traditional background checks are all treated as consumer reports under federal law, per a 2024 CFPB circular, and using them for hiring, retention, promotion, or reassignment decisions means complying with the Fair Credit Reporting Act. That means an employer cannot simply run a background check quietly in the background of the hiring process.
This isn't a hypothetical risk. In late 2024, a background screening company paid $611,600 to settle a class action alleging it provided criminal history information to employers without properly notifying the individuals involved, exactly the kind of consent failure that triggers FCRA liability. Employers must tell the applicant, in writing and in a stand-alone document separate from the job application, that a consumer report may be used for employment decisions, and get the applicant's written permission before obtaining the report.
Every applicant subject to a background check has the right to know a check was conducted, the right to give or withhold consent before it happens, the right to receive a copy of the report before any adverse action is taken, and the right to dispute inaccurate information with the reporting agency. Skipping any of these steps opens the door to legal exposure, regardless of how the information in the report ultimately gets used.
Helpside works with clients to build compliant disclosure and consent documents into the hiring process, so the paperwork is in place before a background check ever begins.
It's tempting to type a candidate's name into a search engine or take a look at their social media profiles before making a hiring decision. It feels harmless, even helpful. But this habit creates real legal risk.
Casual online searches almost always surface information that has no business being part of a hiring decision, including age, race, religion, family status, or disability. Under Title VII of the Civil Rights Act, none of those characteristics can lawfully influence a hiring decision. Even when a hiring manager has no intention of discriminating, unconscious bias can creep in the moment that information is visible. If a rejected applicant later argues their protected status played a role, an employer's own social media research can become evidence used against them.
The safer path is to keep information-gathering inside a structured, documented process, whether that's a formal background check through a consumer reporting agency or a standardized reference check, rather than informal searches that mix relevant and irrelevant information together.
Medical history should never be part of a pre-employment background check. The Americans with Disabilities Act prohibits employers from letting an applicant's medical records or medical history influence a hiring decision, and the EEOC continues to enforce this closely. In one recent case, a major retailer paid $1 million to settle an EEOC lawsuit after requiring warehouse job candidates to pass a medical exam and disclose personal and family medical history before being hired.
What an employer can do is describe the essential physical requirements of the role and ask candidates directly whether they can perform those functions, with or without reasonable accommodation. That keeps the conversation focused on job-relevant ability rather than diagnosis or medical history, and it keeps the hiring process on the right side of the ADA.
Employers can request an applicant's credit history, but only with written consent, and only in the narrow set of cases where credit history genuinely relates to job performance, such as certain finance or high-level fiduciary roles. At least 13 states currently restrict or prohibit employer credit checks entirely for most positions, so it's worth confirming your state's specific rules before running one.
Outside of those limited circumstances, requesting a credit score adds legal exposure without adding much useful hiring information. When in doubt, it's worth asking whether the role genuinely requires financial trustworthiness as a job function, or whether the request is simply an extra layer of caution that isn't tied to the position itself.
Two developments are worth flagging for any employer revisiting their hiring process today.
Fair chance and "ban the box" laws have expanded. 37 states and over 150 cities and counties now have fair chance hiring laws that restrict when employers can ask about criminal history, often delaying that question until after a conditional job offer has been made. Some of these laws also require the same individualized assessment the EEOC recommends before an employer denies employment based on a criminal record. These rules vary by location and change frequently, so it's worth confirming current requirements for every state and city where you hire.
Blanket disqualification policies carry more risk than ever. In April 2024, the EEOC sued a major employer over a pass/fail criminal background check matrix that screened out applicants without conducting an individualized assessment, exactly the kind of blanket policy regulators are actively targeting. Automatically rejecting every applicant with any criminal history, without weighing the nature of the offense, how much time has passed, and whether it's actually related to the job, creates significant legal exposure and may violate state fair chance laws even where it doesn't violate federal law.
Do employers need written consent to run a background check? Yes. Federal law requires a stand-alone written disclosure telling the applicant a consumer report may be used, and written authorization from the applicant before the report is obtained. A 2024 settlement involving a major background screening provider shows regulators and plaintiffs' attorneys are still actively pursuing consent violations.
Can an employer search an applicant's social media instead of running a formal background check? Employers can look at public social media, but doing so is risky. Informal searches often reveal protected characteristics like age, religion, or family status, which cannot legally factor into a hiring decision under the Civil Rights Act, even unintentionally.
Can a background check include medical information? No. The Americans with Disabilities Act prohibits using medical records or medical history in a hiring decision. A 2023 EEOC settlement over required pre-employment medical exams shows this is still an active enforcement priority. Employers may instead ask whether a candidate can perform the essential functions of the job.
When is it legal to request a candidate's credit report? Only with the candidate's written consent, and generally only when the role has a clear connection to financial responsibility, such as certain finance or fiduciary positions. At least 13 states currently restrict or prohibit credit checks for most other roles.
What is a "ban the box" law? Ban the box or fair chance hiring laws restrict when an employer can ask about criminal history, often requiring employers to wait until after a conditional job offer before asking. These laws exist in 37 states and over 150 municipalities, and requirements vary by location.
What is an individualized assessment, and when is it required? An individualized assessment means evaluating the nature of an offense, how much time has passed, and whether it's related to the job before making an adverse decision based on criminal history. A 2024 EEOC lawsuit against a major employer over its pass/fail screening matrix shows regulators are actively enforcing this standard.
What happens if an applicant disputes information in their background report? Candidates can dispute inaccurate information directly with the consumer reporting agency, which must generally complete its reinvestigation within 30 days. Employers should pause their decision-making process during that review period.
What's the risk of using a blanket policy that disqualifies every applicant with a criminal record? Automatically excluding every applicant with a criminal record, without an individualized assessment, creates significant legal risk. The EEOC's April 2024 lawsuit over a pass/fail criminal history matrix is a recent, concrete example of this exposure playing out, and it may also violate state fair chance hiring laws.