Case study: background check

Sept. 1, 2004
A doctor ran a credit check as part of the final process of deciding on applicants for a front-office position. One applicant, who was not selected, inquired why she was not hired.

Bent Ericksen and Tim Twigg

A doctor ran a credit check as part of the final process of deciding on applicants for a front-office position. One applicant, who was not selected, inquired why she was not hired. When the credit check was mentioned, the applicant said that it had been done without her permission and was illegal. Although the doctor contended that the credit check was not used in the decision, he still found himself in a legal dilemma because he did not obtain her permission.


Checking an individual's background before hiring has a number of benefits. These include confirming occupational licensing; preventing negligent hiring claims; and reducing the risk of wrongful discharge, discrimination, and other claims brought by persons who are not hired or terminated when found to be unsuitable for a position.

Additionally, the knowledge that a reference check or background check may be made may discourage applicants with a questionable background from applying for the job.

Unfortunately, too few dentists conduct reference or background checks. This leads to problems. For example, a front office employee who was convicted of having embezzled $85,000 was found to have been discharged from another office for embezzlement following a belated reference check.

A key issue for employers is what the law considers to be a "background check" and what it considers to be a "reference check." This is important because the legal requirements differ.

Reference checks involve the prospective employer verifying an applicant's employment dates, job title, last salary, and job performance with a previous employer. To avoid possible charges of "negligent hiring," you must always make a "good faith-effort" to check references. For more details, refer to our October 2003 column.

On the other hand, background checks involve matters of public record and are part of a broader category of "consumer reports." Consumer reports are governed by The Fair Credit Reporting Act (FCRA), and occasionally, specific state laws. They are defined as any communication of information by a consumer reporting agency. "Public records" means documentation of an arrest, indictment, conviction, civil judicial action, tax lien, or outstanding judgment. This category also includes an individual's credit-worthiness, credit standing or capacity, character, general reputation, personal characteristics, or mode of living. This information is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the individual's eligibility for employment.


Before conducting a reference check, obtain the applicant's permission in writing. Ask the applicant to sign a statement that permits prior employers to provide any information related to the person's work performance and waives any legal action related to the disclosure of such information. (Call our office for an example of Application Form #102 and our Reference Request Form #105.)

Since credit checks can have an adverse impact on women and minorities — and federal and state nondiscrimination rules apply — make sure you can prove the business necessity of delving into an applicant's personal finances. If you decide to pursue any type of "consumer report," you probably will use a third party. Follow the procedures outlined below.

1) Give the applicant a written disclosure of your possible intent to obtain a consumer report, and let the person know results will affect the employment decision.

2) Obtain the applicant's written permission to request such a report. This written authorization should be in a document separate from the rest of the application materials.

3) Provide the applicant with a copy of the public record within seven days after receipt of the information. This rule applies whether the information is received in written or oral form, unless the individual waives that right in writing.

4) If you do not hire the applicant, you must provide the individual with a copy of the report and a written notice of his or her rights under the FCRA, regardless of the waiver.

5) Notify the applicant that she or he can dispute the consumer reporting agency's findings by taking up the matter with that agency.

6) Inform the applicant that she or he is entitled to a free report if the request is made within 60 days.

Bent Ericksen is the founder and Tim Twigg is the president of Bent Ericksen and Associates. For over 25 years, the company has been a leading authority in human resources and personnel issues, helping dentists successfully deal with the ever-changing and complex labor laws. Both authors are members of the Academy of Dental Management Consultants. To receive a complimentary copy of the company's quarterly newsletter or to learn more, contact them at (800) 679-2760 or at

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