You’ve certainly heard the old saying: “Our people are our greatest asset.” We all know what the phrase intends to convey, but, if you think about it, the analogy is clumsy at best.
In the real world, assets are things that can be bought, sold or traded, like buildings, equipment, patents, systems and secret ingredients. With the exception of sports teams, employers do not “own” their employees. Nor can they buy them from someone else or sell or trade them to another employer.
“Our people are our best investment,” is closer to the truth because the only way balance sheet assets create and deliver value is through the organization’s human capital. And the case can be made for: “Our people are our best investors,” too because of the time they invest in the company and its future. Unfortunately, “Your people are your greatest liabilities,” is true as well.
Consider the case of a retail employer who was held liable for the negligent hiring and retention of an aggressive employee with a criminal record who sexually assaulted a female coworker. The court ruled that the store be held negligent because it should have learned about the employee’s past behavior as part of its pre-employment background investigation. The court found: “The failure to conduct the pre-employment investigation directly contributed to the violence perpetrated on (the plaintiff). Consequently, the store showed a conscious disregard for the rights and safety of others.”
While the possibility of an incident like this happening in your world may seem remote, the frequency of actual occurrences has made negligent hiring lawsuits one of the fastest growing areas of tort litigation. Employers are being hit with multimillion dollar verdicts and settlements–in addition to the sizeable attorneys’ fees. Under labor law it seems you are guilty until proven innocent.
Another growing area of litigation is negligent retention. Employees and customers have successfully brought suit against employers who knew an employee had a problem or posed some kind of risk and didn’t take corrective action, which includes measures such as counseling, medical advice, therapy or termination.
The risk in either of these cases is tremendous because it takes being wrong only once to bankrupt a business.
There’s another downside to the failure to properly screen job applicants. Studies have repeatedly shown that companies that do not have these checks in place become the “employer of choice” for substance abusers as well as those with questionable backgrounds and criminal records.
The U.S. Department of Mental Health and Human Services reports:
• Most of the nation’s approximately 16.4 million illicit drug users and approximately 15 million heavy alcohol users hold full-time jobs.
• By industry, most illicit drug users are among foodservice workers (17.4%) and construction workers (15.1%).
• By industry, most heavy alcohol users are among mining and construction (17.8%), installation, maintenance and repair workers (14.7%) and foodservice workers (12.1%).
In the study, “Worker Substance Use and Workplace Policies and Programs,” by the Substance Abuse and Mental Health Services Administration, it was found that employees who abuse illicit drugs:
• Cost U.S. companies over $140 billion annually;
• Are absent 10 times more frequently than non-users;
• Cause as much as 50% of all on the job accidents and 40% of employee theft;
• Have a 30% higher turnover rate; and
• File more worker’s compensation claims.
Because of statistics like these, every employer–no matter the industry–needs to recognize what’s on the line when they skip or skimp on pre-employment checks and, in addition to pre-employment drug testing, institute either on-the-job random drug testing or make it company policy that you have the right to conduct drug testing “for cause” (should an incident or accident occur).
How thorough and in-depth the pre-employment screen is, however, depends in large measure on the nature of your business as the risks of failing to screen are far greater in certain industries and jobs than in others.
As a general rule of thumb, the greater the employee’s interface with coworkers, customers and the general public or the greater the employee’s access to cash, merchandise and valuables, the greater the employer’s obligation to conduct appropriate back-ground checks.
Taking the Right Steps
A sufficient screening for an office worker who does not have access to valuables and interfaces only with the store manager would consist of a thorough business and personal reference and education check plus pre-employment and intermittent, random or “for cause” on the job drug testing.
The more you know the less you risk and you need to know more when you hire for positions of trust, including the likes of cashier, accountant and security guard. In these cases, background and credit checks are recommended as well. Basic background checks gather information from public records and can provide address and phone number histories, aliases and maiden names, worker’s comp claims and driving records.
For high risk positions, where an employee travels unsupervised to a customer’s home or place of business, it’s prudent run the gamut– reference, education, drug, background, credit and criminal record checks.
Whether you do it yourself or hire an outside vendor to run some or all of these checks, it only makes sense to do the cheapest ones first. such as reference checks and Social Security Number verification.
An employer with a reasonable and consistently followed pre-employment background checking process can greatly reduce its exposure to negligent hiring and negligent retention claims.
Whether you feel the need for extensive checks or not, every employer needs to have these basic protective measures in place:
1. Get separate pre-employment waivers from all applicants to conduct each of these checks: reference, drug, background, credit and criminal record, whether you plan to run them or not. These waivers put applicants on notice that you take hiring seriously and have the right to verify and investigate their histories. The benefit here is that many unfit applicants will “mysteriously disappear” after signing these releases.
2. Before conducting an interview, preface the meeting with a statement to this effect: “We are not willing to put ourselves at risk for negligent hiring lawsuits and will check your references and history thoroughly. If you’ve had any kind of a problem with drugs, the law, your credit history or on another job, if you tell me about it now, we can take it under consideration.
But if you don’t tell me and it comes up during our check, I cannot hire you. Is there anything that might come up that you’d like to clarify for me now?”
3. During the interview, ask the applicant to tell you about their last performance review or, if fresh out of school, report card. If you decide to make an offer of employment, make it conditional on the person providing you with a copy of that review or report card, plus the results of the drug test, reference and any background checks.
4. After the interview, be religiously diligent about former employer and personal reference checks. While most employers ask for references, far too many fail to check them.
As you’ve probably learned the hard way by now, what you see is not always what you get. The time it takes to check employment and personal references can save you a world of grief.
The best way to get the information you need is to fax a copy of the reference release form to the former employer before you call. This form, collected at the time the person completed your employment application, gives former employers the applicant’s written permission to give you reference information.
The first question to ask a former employer is, “Is this person eligible for rehire?” and, if not, “Why not?” Then ask about the traits and abilities that are important to success on the job like dependability, team player and compliance to structure.
A question that may uncover new information or gaps in employment is, “Can you tell me where this person worked before they went to work for you?”
Most importantly, give former employers a brief description of the position the applicant might fill and ask, “Is there any reason I should not hire this person for this job?”
5. Verify all educational claims as well.
6. Document and keep records of all discussions and checks conducted. The whole point is to be able to prove in court that you were not negligent and are, therefore, not guilty.
7. Be consistent. Even the most thorough procedure will not protect an employer who fails to use it. If pressured to fill a position as quickly as possible, do not cut the process short.
With these measures in place, should a negligent hiring lawsuit occur, your pre-employment background investigation is the best possible defense because it establishes that the company was prudent and acted responsibly during the hiring process.
Plus, with these measures in place, it’s highly probable that a negligent hiring lawsuit will never occur and you will be able to proudly say without reservation: “Our employees truly are our best investment.”