If you are fortunate enough to earn an offer many companies will make you a verbal offer first, contingent on a background check.
Along with reference checks, companies are increasingly relying on background checks. Usually this is contracted out to a third party; they will check things like your employment history, education, criminal background, and less commonly, your credit history and salary history.
In my company’s case our candidates are told up front they will be put through a background check. They also have to sign a consent form that outlines just what will be checked, and I believe that includes salary history. That may or may be sufficient to extract salary information from previous companies - I don't know since INAL (I’m Not A Lawyer). However, people can't say that they haven't been warned. They are free to decline the verbal offer before the background check begins.
Some might claim this is a violation of privacy, but I don't think it's any worse than Intellectual Property Agreements, Non-Compete clauses, or even affidavits that you are a non-smoker (for insurance reasons). These are all things that many companies require you to sign before you can work there.
And besides, if you really want to talk about a violation of privacy consider that some companies expect you to take a drug test before you start. Fortunately for the 420-friendly readers out there drug tests are becoming less and less common amongst employers.
In any event, the increasing use of background checks means that you can no longer blatantly lie on your resume or exaggerate your salary. This may seem Big Brother-ish, but it should really be seen as a good thing -- at least for those who are trying to stay honest.
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My objection to Drug tests is that they measure the wrong thing.
Suppose Andy a genius programmer who likes to get baked out of his mind on friday night, but comes in monday sober and ready to go.
Now suppose Bob drinks is brains out every night and is either drunk or hung over 24/7.
You want to hire Andy and avoid Bob. The Drug test will lead to the wrong decision.
Your background check is becoming more and more important as part of the interview process. Many jobs now are required by law to have background checks as part of the hiring process. Jobs in law enforcement, security, working with kids, working with the elderly, and working with the disable require background checks. Make sure you have a correct background and criminal history before you start the job search process. One site that will help with this is http://www.statebackground.com background check
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