Making informed hiring decisions with pre-employment background checks Featured

2:12pm EDT August 2, 2011
Making informed hiring decisions with pre-employment background checks

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 percent of the MBA degrees it verifies on resumes are false. College and university registrars report that at least 60 percent of the degrees they are asked to verify are falsified. The Wall Street Journal reports that 34 percent of all job applications contain lies regarding experience, education and the ability to perform essential functions of the job.

Smart Business spoke to Ron Williams at Talon Companies about how business owners can avoid the liability of making a bad — or dangerous — hire through the proper use of background checks.

Why should employers be concerned with accurate background checks?

Consider these statistics:

  • 30 percent 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

What do business leaders need to know when hiring employees?

Even more deadly than fiscal loss due to employee dishonesty is workplace violence. Not to mention the harm it causes employees and the company’s reputation, 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 their 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 judgements that find employers liable for negligent hiring 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 emp;loyee 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.

What can happen to an employer who does not conduct appropriate background checks?

As an example, an armored truck company in Los Angeles 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 inured 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 suite 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 as 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 should employers do to prevent these kinds of suits?

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 of 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 or her application. Are any patterns of short-term employment noted? Ask the applicant for his or her explanation, then verify their explanations through a reliable background check 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 (714) 434-7476.

Ron Williams is the CEO at Talon Companies. Reach him at (800) 808-2566 or rwilliams@talonexec.com. Reach Talon Companies Headquarters at service@talonexec.com, (800) 808-2566, or www.TalonCompanies.com.

Talon Cyber Tec is a subsidiary of Talon Executive Services, an independent risk management firm providing full spectrum services to secure corporate assets and prevent loss due to malevolent acts.