In spite of its name, FCRA covers more than just credit reporting. The federal FCRA sets standards and guidelines for employers who want information about current or potential employees. The FCRA regulates all ‘consumer reports’ which relate to the ‘character, general reputation, personal characteristics, and mode of living’ of a person. This is, of course, what you as an employer want to know! Whether you check credit or not, any kind of pre-employment background check performed by a third party consumer-reporting agency thus becomes subject to the FCRA.

With today’s concerns about security, workplace violence, and corporate scandals, more employers are utilizing pre-employment screening as a routine part of the hiring process. Along with drug testing, background screening is often used to verify the background and identity of a potential new employee. More than 96% of HR professionals indicate that background checks are used in their companies. In 1996, The Society for Human Resource Management Workplace Violence Survey reported only 66% of companies were using background screening.

As an employer, your insurance agent and attorney have likely advised you to have various kinds of insurance to protect your company. You may even have insurance that pays in the event your company is sued for negligent hiring practices.

It’s important to know, however, that insurance is unlikely to cover all the financial costs of negligent hiring activities. Equally important are all the non-financial costs if you hire an employee who later commits murder, assault, rape, or armed robbery against a customer or another employee! Negligent hiring lawsuits are just one more great reason you should do thorough employee screening and background checks prior to hiring.