The Cost of Not Doing a Proper Background Check
Running a small business or managing a nonprofit is often a labor of love. One of the essential skills many managers in these sectors are continually working on is how to cut costs and run a leaner organization.
Any organization operating on a tight budget is often wary about the upfront cost associated with an employment background check. Even though working with a reputable agency is relatively inexpensive, many small-business owners would rather skip the background checks altogether or look to cut corners and go at it on their own, not worrying about whether they are being FCRA compliant.
The desire to cut costs is understandable, but failure to properly perform an employee background check can cost much more.
In this blog, we’ll look at a few instances where companies ran into legal issues that were tied to their failure to perform adequate background checks.
Make sure you’re FCRA compliant
Procedure is important! In August 2013, James Ellis III sued the trucking company Swift Transportation for violating the Fair Credit Reporting Act. Due to the results from his background check, Ellis was turned down for a job. However, Swift Transportation did not inform him that he had a right to get a free copy of the report, as required by FCRA — a small but important procedural matter. Instances like this are more frequent than you think and highlight the need to work with a company that can navigate complex laws.
Many businesses large and small require that employees have certain credentials. Neglecting to ensure new hires really have the qualifications to work in your industry can be costly. Most recently, this was dramatically demonstrated when the Financial Industry Regulatory Authority (FINRA) fined J.P. Morgan Securities, LLC to the tune of $1.25 million for failing to adequately screen 8,600 individuals for felony convictions or disciplinary actions from financial regulators.
Okay, so this example is rather extreme. But again, it illustrates an important lesson: Namely, that cutting corners can do more than harm your business or endanger employees — it can lead to costly fines as well.