Since information gathered during a background check can make or break whether a job candidate gets a position with your company, background checks should be conducted with sensitivity and regard to privacy.o avoid getting yourself in trouble with the law for unfair hiring practices, allow only trained human resources personnel or an outside agency to conduct background checks. Anyone performing background checks should be familiar with the Bankruptcy Act, Equal Employment Opportunity laws, and the Fair Credit Reporting Act.

The Legal Obligations of Conducting a Background Check

The Bankruptcy Act says that it's unlawful to discriminate against anyone who has declared bankruptcy. Equal Employment Opportunity laws are in place to prevent job discrimination against minorities based on poor credit ratings. You must show that credit ratings are applicable to the job in question. The Fair Credit Reporting Act requires that employers who want to check credit reports during the hiring process first obtain written permission from the job applicant.

Because of the strict standards on checking prospective employees' credit, many employers check credit only when an applicant is applying for a financially responsible position such as credit manager, controller, chief financial officer, or accounts payable or receivable clerk.

To avoid legal problems, no matter what level of a check you are conducting, ask prospective employees for their written permission. Even better ask prospective employees to sign a consent form that gives former employers permission to release employment information. At the least, always let prospective employees know that you will be conducting background checks and what kind of information you will be examining.