Online Newsletter - September 2003

PRE-EMPLOYMENT BACKGROUND CHECKS:

By Ronald T. Williams, USSS Ret.

Who have you hired lately? What do you know about their backgrounds? Is the information they provided on their resume or application accurate? The National Credit Verification Service says that 25% of the MBA degrees it verifies on resumes are false. College and University registrars report that at least 60% of the degrees they are asked to verify are falsified. The Wall Street Journal reports that 34% of all job applications contain lies regarding experience, education, and the ability to perform essential functions of the job.

The New York Times recently conducted a study of businesses and concluded that an estimated 72% of inventory shrinkage can be attributed to employee theft. The cost to businesses in the United States each year is between $15-25 Billion, according to the Bureau of National Affairs, while the U.S. Department of Commerce reports similar dismal statistics such as:

• 30% of small business failure is caused by employee theft
• Internal employee-related thefts occur 15 times more often than external theft
• Embezzlement losses exceed $4 Billion every year
• "Other" employee crimes cost businesses an estimated $50 billion annually.

Even more deadly than fiscal loss due to employee dishonesty, is workplace violence. Statistics show that the average award in a workplace violence lawsuit exceeds $1 million per case, and overall, on-the-job violence costs employers $36 billion per year.

One of the easiest and most effective ways a company can protect itself and its assets against loss of any type, is to hire the right people. Although obvious, this advice is seldom heeded by employers, who rely on intuition in making hiring decisions more often than established facts learned through background checks. Most businesses have neither the expertise, nor the time to wade through the mountains of information from an almost infinite number of sources, all available to verify and check the background of an applicant. By failing to perform even the most rudimentary background check on a potential employee, employers are exposing themselves to liability for negligent hiring, and after the fact, for negligent retention.

What is Negligent Hiring?

Today, it is fairly common knowledge that employers have an obligation to provide a safe work environment for its employees. But not everyone is aware of the consequences that can stem from negligent hiring and/or negligent retention of employees

Negligent hiring occurs when an employer does not exercise "reasonable care" in hiring a new employee. More and more legal actions are resulting in judgments that find employers liable for negligent hiring in situations when an employee was hired into a position without the proper checks in place to verify that individual's history. An employer who hires someone with a history of criminal behavior, when that employee harms another employee, client or vendor, is likely to be held accountable. Additionally, employers run the risk of being held liable for negligent retention if they do not respond appropriately to signals from current employees that they may pose a threat to those with whom they associate through work.

Case Law

In Los Angeles, California, an armored truck company paid a $12 million settlement in a negligent hiring and training lawsuit. The suit alleged that the company did not adequately investigate an employee's past work record or provide adequate driver training.

In a federal court in Tennessee, a store customer was injured when restrained by a security guard who had identified the customer as a shoplifter. The customer was awarded $10 million in damages, claiming negligent hiring and failure to properly train the guard.

In Dallas, Texas, a suit against the owners and management of an apartment complex was settled for $5 million. The suit, filed by family members of a deceased tenant, alleged that the tenant was killed by the assistant manager's brother. The suit claimed that management was negligent in hiring an assistant manager without conducting a criminal background check. In this example, it was not even an employee who was identified as the murderer, yet the employer was cited for not conducting simple criminal background checks.

What Employers Should Do:

Because employers are held accountable if they knew, should have known, or had any reason to believe that an employee or prospective employee posed a risk or threat to others, it is essential that thorough background checks be conducted and documented.

At a minimum, every employer should carefully inspect the information recorded by an applicant on his/her application. Are any patterns of short-term employment noted? Ask the applicant for his/her explanation, then verify their explanations through a reliable background checking agency. Social Security number verification, criminal and civil record searches and credit reports should all be part of an employer's pre-employment screening program.

Proper screening of employees makes it possible for an employer to make an informed decision about applicants before they are hired and brought into the workplace. Such basic practices give an employer the ability to create a safe and profitable work environment and protect against loss. For more information on background checks of all types, please contact Talon at the number below, or at backgrounds@talonexec.com