Should You Conduct a Background Check on Contract Candidates?

Should you run a background check on a contract candidate? When we answered that question in February 2010, the answer was yes, and it still is. What's changed is how much law now shapes the way you do it.

What we said in 2010

Our original answer was short. A background check is an important step in the contract staffing process. More and more client companies were insisting that recruiters run a thorough background check before a candidate started a contract assignment, and quite often a drug screen as well.

The risk of skipping it was easy to picture. If you placed a contractor and a criminal record or other red flag surfaced later because nobody checked, you could lose the placement, and your professional reputation could take serious damage.

The FCRA steps that apply today

When a background report comes from a company in the business of compiling background information, the federal Fair Credit Reporting Act (FCRA) applies. The FTC's guidance for employers using consumer reports lays out the required steps:

1. Disclosure. Tell the candidate in writing that you may use a background report for employment decisions. The notice has to be a stand-alone document and can't be part of the employment application.
2. Authorization. Get the candidate's written permission before ordering the report.
3. Certification. Certify to the screening company that you followed these rules and won't misuse the information.
4. Pre-adverse action notice. If something in the report may lead you to reject the candidate, first send a notice with a copy of the report and "A Summary of Your Rights Under the Fair Credit Reporting Act." That gives the candidate a chance to review it and respond.
5. Adverse action notice. If you go ahead with the decision, tell the candidate. The notice includes the screening company's contact information, a statement that the screening company didn't make the decision, and the candidate's right to dispute the report and request a free copy within 60 days.

Once you're finished with a report, dispose of it securely. The FTC's guidance covers that step too.

Using criminal history fairly

Federal anti-discrimination law applies no matter where the information comes from. The EEOC and FTC's joint publication, Background Checks: What Employers Need to Know, says to apply the same standards to everyone and to take special care with screening rules that could disproportionately exclude people based on race, national origin, or another protected characteristic.

For criminal records specifically, the EEOC's enforcement guidance on arrest and conviction records points employers to three factors: the nature and gravity of the offense, the time that has passed since it, and the nature of the job. It also explains that an arrest record alone doesn't prove someone committed a crime, so any decision should rest on the conduct behind the arrest.

State and local rules add another layer. A number of states and cities have fair chance laws, often called ban-the-box laws, that limit when you can ask about criminal history. California's Fair Chance Act, for example, generally bars employers with five or more employees from asking about conviction history before making a job offer. Requirements vary by state and city, so check the rules where your contractor will work and talk to employment counsel about anything that's unclear.

Who runs the check on a contract placement

When an Employer of Record (EOR) employs your contractor, the EOR is the employer making the hiring decision, so screening usually runs through it. At FoxHire, background checks go through our preferred screening vendor, and we can work with a client's own vendor when it meets our criteria. That helps keep the disclosure, authorization, and notice steps consistent on every placement.

Your part is to learn the client's screening requirements at intake. Ask which checks they need, such as criminal history, a drug screen, or license verification, and build that time into the start date. For more detail, see our posts on how to conduct legal background checks on contractors and whether contractor background checks can be discriminatory.

The 2010 answer still stands: check before your contractor starts. Just make sure the process behind the check is as careful as the decision you make with it.