Background Checks Are Key

Savvy pre-employment screening can shield employers from what Los Angeles attorney Jamie Johnson calls “nightmare hires”: employees who endanger others, destroy property, disrupt work or cost their firms financial losses.

“The damage that can be done to a company, particularly a small company, can be considerable,” said Johnson, a partner in Brobeck, Phleger & Harrison’s labor and employment group.

Despite this, an estimated one in five companies fails to check applicants’ backgrounds, according to EMDM, a Georgia-based pre-employment screening firm.

“Don’t be impulsive,” said David Lewis, president of OperationsInc.com, a human resources consulting firm. “You’re putting a piece of your company’s fate in that applicant’s hands.”

Negligent hiring suits are on the rise, according to the ABA Journal, the journal for the American Bar Assn. These suits, filed after employees have committed harmful acts, allege that employers didn’t diligently research their workers’ backgrounds before hiring them.

And employers are losing negligent hiring suits about 72% of the time, according to Public Personnel Management, a trade journal.

These lawsuits can cost companies a lot.

A California appeals court last year upheld a $3.8-million award against Kmart after one of the company’s plainclothes security guards tackled and roughed up a Livermore customer who attempted to return a purchase, according to Mark McLean, an attorney with Arter & Hadden in Los Angeles.

Before being hired, the guard had only partially completed Kmart’s employment application and didn’t furnish full addresses for his past residences, according to the court records. Had Kmart checked the guard’s employment history, it would have found he had been terminated from several jobs.

In another case, a Tallahassee, Fla., furniture company was hit with a $2.5-million judgment for negligently hiring and retaining a deliveryman who later used a knife to attack a customer in her home.

The deliveryman hadn’t completed a job application, and the furniture company hadn’t checked his background, according to court records. If it had, it would have discovered a history of violent crime.

The average settlement is $1.6 million, according to Public Personnel Management.

Background checks can help shield companies from negligent hiring lawsuits.

Courts evaluate many factors when assessing negligent hiring cases, including whether, prior to hiring, an employer could have discovered that an individual posed a risk. California courts also evaluate whether an employer made reasonable inquiries into the person’s background.

Experts recommend that companies learn how to detect the most common misrepresentations, falsifications and omissions that applicants may make: altering employment dates, inflating salaries, exaggerating titles and responsibilities, and faking certifications, licenses and educational credentials.

Companies that don’t have individuals on staff who can conduct skilled background checks should consider outsourcing the job to companies that specialize in the practice.

“When you start finding inconsistencies, it’s often the tip of the iceberg,” Johnson said.

Ivan Gordon, vice president of ATS Professional Services in Jacksonville, Fla., once investigated an “attorney” who had applied for a position with a Northern California law firm. “But it turned out the person had never taken the bar exam or attended law school,” he said.

A contracting firm in the South ended up shelling out $150,000 to outside auditors to correct its financial records after having hired a controller who, it later turned out, had presented two business degrees from a diploma mill.

According to Avert Inc., a Fort Collins, Colo.-based background checker, about 24% of job applicants misrepresent work experience or education. Twenty percent conceal information such as criminal convictions that could disqualify them.

But California hirers face a difficult challenge in their pre-employment screening pursuits.

The state’s Civil Code bestows what’s called “qualified privilege” upon former employers to disclose truthful, accurate and documentable information about their former workers’ job performance and characteristics. But the state’s Labor Code forbids those former employers from interfering with workers’ attempts to find employment by giving out false or misleading references.

Some attorneys say this puts California employers in a minefield. They can be sued for offering too much or inappropriate information about former workers, and they can be sued for withholding information.

Many employers, fearing defamation lawsuits, are taking the cautious path. They’re furnishing only what workplace attorneys refer to as “name, rank and serial number”: employment dates, salary ranges and job titles. And they’re instructing their employees to direct all reference check inquiries to their human resources departments or to a designated manager.

“The typical knee-jerk reaction from [hiring] employers is ‘Why check references because we’re not going to get the truth anyway?’ ” said Thomas Cunningham, a labor and employment lawyer at Pingel & Templer in West Des Moines, Iowa.

“I know that’s the typical advice that employers’ attorneys give, but I think it’s overkill,” said Wendy Bliss, attorney, human resources consultant and author of “Legal, Effective References: How to Give and Get Them,” (Society for Human Resource Management, July 2001).

“It punishes good employees who can’t get positive references and makes it very difficult for employers trying to avoid making bad hiring decisions to get to the truth,” she said. “We’ve hurt each other as employers through these unduly restrictive policies. The only people helped are those employees with something to hide.”