It is critical for contingent workforce program managers to understand the value of a background check as well as the risks. For example, a well-designed and well-executed background check can reduce negligent hiring and reduce litigation exposure. However, if not designed properly, companies may run afoul of claims alleging their policies have a disparate impact on minorities.

Therefore, CW programs should apply a consistent management strategy for governing background check usage by weighing the pros and cons for conducting such checks. There are numerous benefits and risks for program managers to consider when conducting background checks. The accompanying table provides some examples.

Pros of Background ChecksCons of Background Checks
Reduce negligent hiring/retention/supervision litigation exposureFinancial cost
Quality controlTime
Confirm the accuracy of the applicant’s credentialsTechnical FCRA requirements
Hire/retain the best candidateDisparate impact claims
Protect employees, customers, vendors, businessDiffering state anti-discrimination laws

Moving parts. Once the pros and cons of these checks are understood, time must be spent on setting up processes the right way. Background check policies, when set up properly, are an effective and important tool to mitigate risks and enhance talent quality in CW engagements. Creating a value-driven background check policy is a continuous process of managing both business value — time, costs and quality — while maintaining regulatory compliance. There are a few core management best practices to follow in keeping a high return on investment on a CW program’s background check value strategy.

There are a lot of moving parts to consider. A singular, blanket background check policy will not address each requirement within a CW program. Not every job role needs a background check and some job roles may be subject to contractual and/or regulatory background check requirements. And some needs can be addressed in other, less costly ways.

Interviewing to weed. For example, market studies have found a growing level of dishonesty on applicant résumés, from exaggerations to outright lies. But such an increase in applicant dishonesty does not necessarily mean CW programs should conduct extensive background checks on all potential CW talent resources. Rather than expend time and money on background checks for these circumstances, CW programs may be able to weed out dishonest CW candidates through a rigorous interview process.

Within the US, there are numerous common laws, statutory regulations and restrictions with which policies and procedures must comply; some are at the federal level, but many states and municipalities have enacted additional restrictions. The accompanying table lists several examples of regulations that may affect the background check policies and procedures engaged.

Legal Considerations When Designing a Background Check PolicyProcedural Considerations for Background Checks Policies
Negligent hiringFair Credit Reporting Act (FCRA) requirements
Caregiver lawsNotice and disclosure
Financial Institutions – Federal Deposit Insurance Corporation (FDIC)Authorization
Insured Depository InstitutionCertification to consumer reporting agencies
Credit Unions – National Credit Union Administration (NCUA)Adverse action notifications - Pre-adverse action letter and/or post-adverse action letter
Department of InsuranceSharing background check information – FCRA exception
Contract requirementsState background check laws
Licensing and certificationBan the Box
Applicant DishonestyDisparate impact – The Uniform Guidelines on Employee Selections Procedures
Disparate Impact – EEOC Guidance
Arrest and conviction record discrimination
Salary history inquiry bans
Social media searches

A well-design background check strategy and plan would take into account many of the above mentioned legal and procedural considerations, but at the end of the day, business is about results. Hence, balancing and managing background risks and engagement/hiring velocity is a key metric for maximizing your leverage of background check investments of cost and time.

Next week, we will discuss key management best practices is establishing effective background check programs.

Background checks are discussed in more detail in SIA’s Certified Contingent Workforce Professional (CCWP) Program. For more information, go here.