Protect Your Organization Against Negligent Hiring Suits

June 21, 2005 - By Theresa Minton-Eversole

SAN DIEGO -- There's little doubt we live in a more dangerous world than we did just five years ago. And headline news reminds us that the dangers we face can all too easily permeate the workplace. Such incidents have led to negligent hiring and negligent retention liability lawsuits, most of which could be avoided if companies just adopt a few common sense practices, according to Barry Nadell, who is president of the Calif.-based background checking company InfoLink Screening Services, Inc.

Speaking to a packed house June 20 during his session at the SHRM Annual Conference and Exposition, Nadell said that nothing takes the place of thorough applicant background checking. However, no background checking process is foolproof, so it's crucial for companies to know how to obtain the most accurate information while remaining compliant with the myriad federal and state laws that regulate the industry.

Along with the Fair Credit Reporting Act, the Americans with Disabilities Act and the Equal Employment Opportunity Commission guidelines, Nadell said there are three tough federal consumer reporting laws that dictate how companies must conduct their background checks: the Consumer Credit Reporting Reform Act of 1996, the Consumer Reporting Employment Clarification Act of 1998 and the Fiar and Accurate Credit Transactions Act of 2003.

Basically, "anything written that you get from an investigative company is considered a consumer report," Nadell said. So companies must comply with these laws to stay out of legal hot water, which can be costly. For example, running afoul of the Consumer Credit Reporting Reform Act can yield penalties that include actual damages, punitive damages, cost and attorney's fees, in addition to potential civil and criminal penalties, Nadell explained.

So what is required to remain compliant? Rule No. 1 for dealing with consumer reports is to provide all job applicants with a written form to sign that offers "clear and conspicuous disclosure" that a consumer report "may" be obtained. But, Nadell cautioned, don't include any disclosure form as part of the employment application.

Rule No. 2 is to follow up on the investigation results. "If you don't intend to act on negative information you might receive, then don't waste the money on background checking," Nadell quipped.

However, when acting on the information obtained, companies must follow a three-step adverse action process that first provides a copy of the report to the applicant along with a written description of the individual's rights. Next, the company must afford a reasonable period of time for the applicant to dispute the report results, and then take adverse action in writing or risk getting slapped with a fine by the federal government.

There are myriad sources of information to tap when conducting background checks, and the quality of information obtained from them depends on how well the sources are maintained, Nadell said. In any case, an employer has little control over the reliability of the sources, so a company must attempt to be as thorough as its budget affords and the nature of the job requires. The best bet, though costly, is to conduct a thorough criminal history of felony and misdemeanor convictions through a county court search. There also are many national criminal file databases and state criminal record repositories employers can check, but reliability and accuracy of many of them is often suspect.

Nadell emphasized, "Know the strengths and weaknesses of state repositories. Databases oftentimes aren't up-to-date, so use these as secondary resources. Nothing beats a county court search."

Nadell also recommended that companies routinely conduct education and past employment reference checks, Social Security traces, motor vehicle report reviews and drug testing. But, he said, some reports - such as employment physicals, workers' compensation checks and right-to-work verifications -- should not be conducted until after an offer of employment has been extended.

While conducting effecting background checks often strains both a company's financial and human resources, Nadell said, there are several free things employers can do to keep from hiring an "employee from hell." Among the quick, low-cost options:

• Plaques. Advertise throughout the office that it is company policy to conduct background checks and drug testing.
• Web site notice. Include a similar notice on the company's corporate recruitment site and any other online recruitment advertisements.
• Employee, vendor announcements. Remind employees and vendors that it is company policy to conduct thorough background screenings, which may deter them from recommending potentially bad hires.
• Temp agency reminders. Make sure all suppliers of contract workers know the company's policy and that the company expects them to provide thoroughly screened workers.

Theresa Minton-Eversole is manager of SHRM Online's Employment Management Association forum. Article originally appeared on SHRMOnline.