To help make informed hiring decisions, employers often ask for references from prospective employees. Employers also provide references for former employees seeking other employment. Whether you are conducting a reference check or are asked to provide a reference or employment verification, it’s important to have policies and procedures in place to handle these requests.

The following are some do’s and don’ts regarding reference checks and employment verifications:

Do's:

• Decide when to conduct reference checks. It is generally considered a best practice to wait until you have extended a conditional offer of employment before conducting reference checks. If your company performs reference checks earlier in the hiring process, make sure you are consistent about the timing and confirm that you can lawfully obtain the information you are requesting before extending an offer.
• Obtain authorization. Prior to checking a potential employee’s reference, providing a reference for a former employee, or verifying employment of a current employee, obtain and retain written authorization from the individual.
  
  • When seeking a reference: During the hiring process, ask applicants to sign a form authorizing their former employer to disclose job-related information to your company.
  • When providing a reference: Some employers choose to obtain a departing employee’s authorization at the time of separation. If a prospective employer contacts you and you don't have authorization, ask them to have the former employee contact you to give written authorization.
  • When verifying employment: If an employee needs an employment verification, the employee should submit a written request that includes an authorization to release the information.
• Decide what information to request. During the hiring process, many employers use reference checks to verify information provided in employment applications, resumes, and interviews. For instance, they may use the reference check to confirm dates of employment, positions held, and final salary or hourly wage. Most employers are willing to disclose this type of information, but may be less inclined to provide information on performance- or conduct-related issues.
• Decide what information to provide. When contacted for a job reference, it is considered a best practice to provide only limited information about former employees, such as dates of employment, positions held, and in some cases, final salary or hourly wage. This is generally a preferred approach, since the information is limited to factual and objective data. If you choose to provide more information, make sure you are providing it in good faith; the information is accurate and job-related; and you provide the same types of information about all former employees. Employers should be particularly sensitive to the risks associated with providing a negative reference. Before disclosing any negative job-related information, make sure you have thoroughly documented the issue at the time it occurred. For employment verifications, the information provided is generally limited to dates of employment, positions held, and pay history.
• Inform employees what information you will provide. To set proper expectations, let employees know what type of information the company will provide if asked to provide a reference or employment verification. This can be included in a written policy and within authorization forms. Employers may also choose to re-communicate their policy to departing employees.
• Understand state reference check laws. Several states have enacted laws to help protect employers who disclose information about a former employee in good faith. These laws typically define what type of information is protected. Employers should review their state's law carefully when deciding what information they will provide

Don'ts:

• Don’t request, provide, or use information unrelated to the job. Reference checks for all similarly situated candidates must be subject to the same set of questions, and should only seek job-related information. Never ask for, provide, or use information that is protected by federal, state, or local law. Even if you ask for strictly job-related information, it is possible a former employer may inadvertently disclose protected information (e.g. the individual's age, national origin, family status, etc.). In these cases, the employer should disregard such information when making a hiring decision.
• Don’t forget to talk to references directly. It is a best practice to contact a reference directly via phone, even if a job candidate provides a letter from the reference. Most employers check at least three references. These should generally be professional references from previous employers. Ideally, the reference should be someone who has directly supervised the employee. On the phone, be sure to verify the reference’s role in relation to the applicant.
• Don’t let just anyone provide a reference. To help ensure consistency, it is a best practice to designate a single individual (such as an HR representative) to handle all reference requests. Supervisors and employees should be instructed to direct all reference inquiries to the designated individual. This person should be trained on providing references in accordance with company policies and federal, state and local laws.
• Don’t forget to comply with FCRA if using a third party. If you hire another company to perform certain background or reference checks, you must make sure you comply with the Fair Credit Reporting Act (FCRA). Among other things, the FCRA requires that employers provide written notification to, and obtain authorization from, any individual subject to a background investigation. The FCRA also has very specific guidelines employers must follow when taking adverse action against an individual (e.g. failing to hire) based on the results of the investigation. Several states have their own laws similar to the FCRA so it is important to review applicable state laws to ensure compliance.
• Don’t violate state laws. Some states have enacted laws that prohibit employers from intentionally trying to prevent a former employee from obtaining other employment.

Conclusion:

For reference checks and employment verifications, employers should establish and enforce comprehensive policies and practices that comply with federal, state, and local laws.