Checking the background of new hires

Posted by Jonathan Cook, Senior II, Tax Services on Jan 26, 2017

A monthly average of 178,000 employees were added to employer’s payrolls in the United States in 2016, according to an “Employment Situation Summary” released by the U.S. Bureau of Labor Statistics. Further, significant averages of new hires per month are projected to continue into 2017.

When in the process of hiring, background checks help ensure that your dealership is bringing in “good people” that can be trusted with sensitive customer information – and with your inventory. In this regard, background checks are a proactive solution to problems such as negligence with customer data, and employee theft. 

Laws on the books

In order to avoid a brush with the law, background checks must be performed in strict adherence to privacy rights and laws. These rights and laws vary from state to state and evolve frequently. With this in mind, it is wise to consult with your attorney regarding the current best practice regarding background checks.

One such privacy law is the Fair Credit Reporting Act. This law defines the standards for credit check use when performing a background check. Before requesting a credit (or “consumer”) report, you must:

  • Disclose clearly and conspicuously to the potential or current employee, in a stand-alone document, that you are requesting a credit report
  • Obtain the potential or current employee’s written consent

In many states, only law enforcement agencies, financial institutions, debt collectors, insurance companies and sureties can check credit reports. However, as with many laws, there are exceptions, if limited. Within the Electronic Communications Privacy Act is the permission for other types of employers to request a credit report if there is a “bona fide occupational requirement” of a particular position or group of employees. The limited exception is granted to careers that involve:

  • Access to personal, financial, or confidential information, trade secrets, or national and/or state security information
  • Unsupervised access to cash or certain assets valued at $2,500 or more
  • Bonding or security required by state or federal law
  • Signatory power over business assets of $100 or more per transaction
  • Managerial duties that involve setting the direction or control of the business

Other regulations to follow

The Driver’s Privacy Protection Act regulates how sensitive taxpayer information from state motor vehicle department records can be released and shared. However, the departments generally will make the job candidate’s driving records available, usually for a small fee.

Unfortunately, little to no information can be easily gleaned from most schools, colleges, and universities, as they won’t release records without consent from the student. Even further, some schools won’t release records to anyone but the student.

You also may need the candidate’s consent before performing a criminal background check. In general, it’s illegal to inquire about arrests – you can inquire only about convictions.


As an employer, you may personally conduct a background check. Free general advice on how to do so is available from the Small Business Administration and other similar organizations. Nonetheless, usually the more thorough and convenient approach is to hire an outside agency that specializes in performing background checks, such as a private investigator, background check specialist, or credit agency.

Care should be taken when selecting a background check provider. There are many internet based start-ups offering better prices. These better prices can be accompanied by a less experienced or thorough firm. That firm may, for example, perform a criminal history search in only the states a candidate has had residence. While it goes without saying, you get what you pay for.

Take caution when offered “instant” background checks. Contrary to what they would want you to think, there isn’t a single national database containing all federal and state convictions. Finding criminal records can be a fragmented task, spanning multiple jurisdictions and courts. Moreover, many internet based start-ups offer low rates for public record searches, while the fine print may detail how the special low rate is per jurisdiction, which will quickly increase the price you pay.

Only one piece of the puzzle

While checking the background of candidate’s is a vital part of hiring the best people for your dealership, it should not be the only part. Yet it is a critical one that must be approached with the utmost care and delicacy.

Contact one of our financial professionals TODAY to learn more about how we can take you to the next step.


Topics: Accounting Tips, Tax, Audit