Uncovering Hidden Risks: Spotting Red Flags in Background Checks

Today, being a human resources professional is synonymous with being a risk management expert. That’s because, even though people are a company’s biggest asset, they’re also a company’s biggest risk.

For example, organizations are 66% more likely to experience malicious or accidental insider attacks by employees than external attacks. Additionally, 75% of employees have stolen from their company at least once. And, now that baby boomers are leaving the workforce, threats surrounding succession planning and knowledge transfer are popping up for businesses everywhere (many large companies fail to pay adequate attention to leadership pipelines and smooth transition practices, leading to excessive turnover and loss of productivity). The list goes on. 

As a result of increased threats from the inside, the human resources profession is, in many ways, now structured around mitigating risk at every stage of the employee lifecycle. And perhaps the most important checkpoint of the employee lifecycle for limiting overall HR risk is the hiring process—by stopping threats before they even make it through the door. The hiring process is a time to evaluate a potential employee’s fitness for the role and company and to spot red flags, the kind that could put the business, its people, finances, and reputation in danger if hired. 

Improving Hiring Outcomes with Background Checks 

Employers and hiring professionals have figured out that the easiest and most efficient way to spot red flags in a potential employee during the hiring process is by conducting pre-employment background checks. Traditional hiring practices, like resumes and interviews, can provide important clues that point to whether or not an employee is a fit, but they’re ultimately just that (clues) due to the subjectivity that comes with human evaluation.

To gather objective data about a candidate and make more evidence-based hiring decisions that mitigate overall people risk, 95% of employers conduct pre-employment background checks. Hiring teams know that background checks majorly upgrade hiring outcomes by improving the quality of hires, workplace safety and security, regulatory compliance (preventing expensive negligent hiring lawsuits), and more. Background screening brings more consistency and fairness to how organizations evaluate candidates and unlocks opportunities for greater efficiency in the hiring process since background checks tell a comprehensive story about a candidate’s past with just some simple data collection and record-checking. 

How to Spot Red Flags In Background Checks 

But, how exactly do background checks work that magic? How does comprehensive pre-employment background screening improve hiring outcomes and minimize risk? Below are some examples of red flags that come up during a background check, what that information is communicating to hiring managers about a potential employee, and how that data helps employers make better hiring decisions. 

Discrepancies In Information

During the hiring process, employers are mostly looking to ensure that a candidate has the skills necessary to perform the role, but they’re also looking out for attributes of a low-risk hire–like trustworthiness, honesty, and reliability. Background checks provide an easy way to spot misrepresentations on resumes and in interviews by screening for disparities in employment history, educational background, employment dates, job titles, and more compared to what the applicant provided. If data discrepancies come up during a background check (i.e. extended employment dates or fake degrees), that not only indicates dishonesty in a candidate, but also that hiring them could also lead to a skills shortage, workplace safety concerns, and other forms of risk (since they probably don’t have the experience they say they do).  

Employment History Gaps 

Did you know that upwards of 78% of people lie on their resumes? Interestingly, the most popular way to stretch the truth or falsify application details is to lie about employment dates. That’s why most employers include employment verification as a critical step in their pre-employment background check process. Employment gaps that reveal themselves during employment verification may indicate an inability to maintain steady employment, which could raise concerns about reliability. Employment verification during a background check might also reveal that a candidate left one or more previous employers off their resume, an omission that might signal they’re hiding something negative from their past. And having that information could be the difference between making a (costly) bad hire or making a hire that pushes the business forward. 

Short Tenures

Candidates with a history of job-hopping, demonstrated by short periods of employment at multiple companies, may indicate a lack of reliability and trustworthiness akin to prolonged unemployment gaps. Since there are valid reasons to explain short work stints, such as seasonal work, family emergencies, and internships, it’s essential for hiring teams to inquire about this pattern. However, if a candidate fails to provide reasonable explanations, it might be in the company’s best interest not to hire them. 

Negative References

Reference checks, a standard part of the background screening process, provide valuable anecdotal first-person information about a candidate to fill in resume blanks and corroborate their interview performance. While minor issues or one-off conflicts with past employers shouldn’t set off alarm bells, employers must take note of any patterns that surface from multiple references. Consistent negative behavior in previous roles could be indicative of a recurring pattern, and it’s crucial to consider whether this behavior might carry over to the company.

Relevant Criminal Records 

A conviction for a serious offense, such as fraud, theft, violence, or drug-related crimes, may raise questions about an individual’s reliability, trustworthiness, and potential risks to the workplace (especially workplace safety), ultimately resulting in disqualification from the hiring process. However, criminal history is not necessarily a dealbreaker for candidates—it depends on the role they applied for, the state regulations applicable to the industry, and the perception of their overall betterment. For instance, hiring someone with a history of fraud for an accounting firm or an individual with a theft-related record for inventory management may be ill-advised. Similarly, individuals with violent criminal charges should not be placed in positions involving children. Checking for job-related convictions can help mitigate potential liabilities for your company in case of incidents at the workplace.

Suspicious Credit History

Fifty-one percent of employee background screenings in the U.S. include credit and financial checks. Credit history reveals unique insights into a candidate’s financial life and health, and while this information may not be necessary for all positions, it could be crucial for certain roles, like accountants who are directly responsible for managing the company’s finances. 

Failed Drug Screening

Not all jobs mandate drug testing during the hiring process, but some industries still require it–especially those involving heavy machinery operations where drug use could pose a significant threat to workplace safety and other risks. Failing a drug test should be a major red flag for recruiters, particularly in such safety-sensitive roles.

Poor Driving Record 

Often, employers will run searches—motor vehicle reports or driving record checks—on a candidate’s driving history for traffic violations, license status and type, and vehicle-related criminal charges (like DUIs). If the background check digs up a history of unsafe driving practices or a suspended license, then that might be a good reason to count them out, especially if the role requires operating a vehicle. 

Refusal to Undergo Background Check

To maintain FCRA compliance, employers must obtain explicit consent from the applicant to conduct a background check. If a candidate refuses to participate in the process, it may point to the fact that they are aware of unfavorable information they do not want the company to uncover. A refusal raises concerns about transparency and honesty, so hiring managers should proceed with caution. 

What to Do When You Find a Red Flag 

When a background check does dig up negative information about a candidate, employers have two options: factor in individual considerations or take adverse action. It’s important for HR leaders to train their staff on appropriate background check protocols when this happens in order to maintain a fair and compliant screening process. 

Individual Considerations

Finding a red flag during the hiring process is one thing, but doing something about it is another. Discovering some not-so-positive information on a background check doesn’t mean that employers should automatically disqualify the candidate from the running. Before taking adverse action due to negative background check findings, employers should ask affected candidates for an explanation and take personal context into consideration. 

It’s generally a good practice to avoid blanket exclusions and consider various factors about the candidate’s background. For example, a misdemeanor committed as a teen shouldn’t necessarily block a middle-aged applicant from getting hired. In fact, many federal and state laws require employers to conduct this kind of individualized assessment to stay compliant. 

People with disabilities, for instance, should be allowed to prove their ability to do the job and disprove negative background check information. In fact, that kind of exception-making mentality for less privileged groups might be a good approach when dealing with background check red flags.

Adverse Action

If, after giving a candidate the chance to provide additional context around a negative background check finding, an employer still wants to disqualify them from the hiring process, recruiters must take some specific actions to stay in line with FTC mandates and in compliance with the Fair Credit Reporting Act. 

First, they must provide the applicant with a pre-adverse action notice, a copy of the background check report, a notice of their rights under the FCRA, and “a reasonable amount of time” (five business days) to dispute any of the information in the check before the employer can make a final employment decision. After the pre-adverse action process, the employer can then make a final decision. This notice must include the name, phone number, and address of the CRA that completed the report, language around the fact that candidates have the opportunity to dispute the results, and confirmation that the CRA did not make the employment decision. 

Catch All the Red Flags with Comprehensive Screening  

Background screening isn’t simply about criminal history anymore; now, a comprehensive background check involves several additional layers designed to detect threats. The goal is to cast a wide net, get a holistic view of an applicant, and protect the company from every angle. 

In order to catch as many red flags as possible, employers are partnering up with quality, comprehensive background check services to do it for them. Reputable background check partners help employers conduct a wide range of screenings in a short amount of time, including the following: 

• Social Security number trace
• National criminal file search 
• Sex offender criminal search
• County criminal/other public records search 
• Statewide criminal/public records search 
• Federal criminal/public records search
• Driving records and motor vehicle records search
• Employment verification 
• Education verification 
• Credit report
• Professional license verification 
• Drug screening
• International screening services 

But, while casting a wide net is a start, the data collected isn’t valuable unless it’s accurate since inaccurate or misleading background checks can lead to liability and legal issues. To ensure the accuracy of results and reduce risk, a comprehensive background check will provide access to the most up-to-date and comprehensive court records from all relevant federal, state, and local jurisdictions. 

At S2Verify, for example, we offer access to more than 4,100 federal, state, and local government sources with reliable results using a hybrid process that includes automated record extraction and human oversight. 

Employment screening is complicated work. The rules and regulations differ from state to state and county to county, and the needs of every business differ, too. There’s no one-size-fits-all when it comes to a background check.

 That’s why a quality background check service is backed by great customer support—by real people—that can help employers navigate the gray areas of employment screening and help them get the most out of a comprehensive background check. 

When searching for a background check service that helps them spot all the red flags, HR leaders should find a partner that promises integrity, industry experience, innovation, and an unparalleled commitment to their clients at every step of the way—like S2Verify.