The Importance of Employee Background Checks

As the economy improves, and employers look to build or rebuild their staff, the ability to make smart hiring decisions will be a key factor to long-term success. Feel free to circulate this newsletter to your clients and associates who may not be aware of the benefits of background checks.

By Guest Author Lee Doernberg of Liquid Capital Funding

The process of hiring employees today is complex. Employers need employees who are honest, reliable, and responsible. Yet it’s possible a seemingly perfect candidate for employment will submit an application that is missing critical information or contains history that’s been embellished. In a 2008 survey conducted by, 49% of the 3,100 hiring managers surveyed had caught a job applicant fabricating some part of his/her resume.

Employers also have the concern of protecting their interests. They can be held responsible for criminal acts an employee commits, or accountable for damages or lost wages if a discharged employee files charges for what is claimed as wrongful firing. According to the American Management Association and US Chamber of Commerce, 30% of all business failures are caused by employee theft.

Given today’s security concerns and the possibility of corporate scandals, pre-employment screening has gained ground.

Provided the initial interviews and verification of references are satisfactory, the next step in the hiring process should be a Background Check. The employment application should include a section the applicant signs granting the prospective employer the right to access additional information for the Background Check.

A Background Check is the process of looking up and compiling information about the candidate. It typically includes details about education, employment verification, medical records, credit score, worker’s compensation, criminal history, and court records. It will usually determine if the applicant has omitted information that should be considered during the hiring process.

Employers need to be aware of the State and/or Government acts they must comply with when conducting background checks – for example, the Fair Credit Reporting Act, Family and Medical Leave Act, and Title VII. There are limits to the type of information employers can gather as well as use as the basis for rejecting a candidate.

Employers may wish to explore outsourcing the conducting of Background Checks to an agency or Professional Employer Organization (PEO). Employers must still know the laws and ensure their hired agency abides by them, or they risk being held liable for negligence. The employer should also ask if the agency hires independent contractors to conduct Background Checks, and if so, require confirmation of appropriate insurance coverage for the agency’s employees.

I hope you find this newsletter helpful. As always, Liquid Capital welcomes the opportunity to assist your clients or associates with their working capital needs in an effort to grow and succeed. And if there is anything else we can do to be of assistance, just let me know.


Lee Doernberg


Lee Doernberg
Liquid Capital Funding

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