Background and reference checks in the United States
Reviewed by Mellow Editorial Team, HR & payroll content team
Before you run a background or reference check on a job candidate, you need written authorization from that person — and you need to follow federal and state rules that govern what you can look at, how you can use it, and what you must tell the candidate if it affects your hiring decision.
What laws govern background checks
The Fair Credit Reporting Act (FCRA) is the main federal law. It applies any time you use a third-party consumer reporting agency (CRA) to gather background information — which covers most commercial background check services.
Under the FCRA you must:
- Give the candidate a clear written disclosure that you intend to run a background check. This must be a standalone document, not buried in your job application.
- Get the candidate's written authorization before you order the report.
- Follow a two-step "adverse action" process if the results cause you to withdraw or deny an offer.
State laws add another layer. Some states restrict how far back a criminal history search can go, limit whether you can ask about salary history, or prohibit checking credit unless the role specifically warrants it. Cities like New York and Los Angeles have their own fair chance hiring ordinances. Before you run checks in any state where you operate or hire, confirm the local rules — they can be stricter than the FCRA.
Step-by-step process
1. Decide what you actually need to check.
Match the scope of the check to the role. A financial controller role might warrant a credit check; a delivery driver role warrants a motor vehicle record search; a role with no access to sensitive data probably warrants neither. Documenting your rationale protects you from claims of discriminatory screening.
2. Choose a CRA or run checks yourself.
Most employers use a third-party CRA for criminal, credit and employment history searches because they handle compliance infrastructure. If you contact former employers directly for references, the FCRA's formal requirements do not apply — but you still need to handle information consistently and fairly.
3. Send the FCRA disclosure and get written authorization.
Before you order anything, give the candidate the standalone disclosure document and collect a signed authorization. Keep that authorization on file.
4. Order the report.
Common components include: criminal history (federal, state and county), employment and education verification, professional license verification, credit history (where permitted and relevant), and motor vehicle records.
5. Review results consistently.
Apply the same criteria to every candidate for the same role. The Equal Employment Opportunity Commission (EEOC) has issued guidance warning that blanket policies excluding anyone with a criminal record can constitute disparate impact discrimination. Consider the nature of the offense, how long ago it occurred, and how relevant it is to the specific job.
6. Follow the adverse action process if you intend to reject.
If a background report is a factor in a negative hiring decision, the FCRA requires a two-step process:
- Pre-adverse action notice: Send the candidate a copy of the report and a summary of their FCRA rights before you make a final decision. Give them a reasonable amount of time — typically five business days is common practice — to dispute inaccurate information.
- Final adverse action notice: If you proceed with rejection after that window, send a second notice confirming the decision, naming the CRA, and explaining that the CRA did not make the decision and cannot explain it.
Skipping either step exposes you to FCRA liability.
Reference checks
Reference checks sit outside the FCRA when you conduct them directly, but they carry their own risks. A few practical points:
- Ask consistent, job-relevant questions across all candidates for the same role.
- Focus on verifiable facts and direct observation rather than asking for opinions about protected characteristics.
- Be aware that some former employers will only confirm dates of employment and job title to limit their own liability. That is a common and legal practice.
- If a reference volunteers negative information, document it factually and consider whether it is relevant to the role before acting on it.
"Ban the box" and fair chance hiring
More than a dozen states and many cities have "ban the box" laws that prohibit asking about criminal history on the initial job application. Some extend this restriction to the entire interview process until a conditional offer is made. If you hire in multiple jurisdictions, map out which rules apply where — the restrictions vary significantly.
Keeping records
Hold background check authorizations and reports securely and separately from personnel files. Many employment lawyers recommend retaining them for at least the duration of employment plus a few years, consistent with general recordkeeping practices for employment documents. Candidates have the right to request a copy of any report used against them, so retrieval needs to be straightforward.
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