Important Facts

Why Perform Background Investigations?

• 60.4% of parolees are convicted of a crime within 6 years of being released from prison.
• Embezzlement losses exceed $4 billion annually
  30% of all employment applications are falsified to some degree.
• 45% of submitted resumes contain false or exaggerated information regarding education, skills and accomplishments. 1 in 20 job applicants falsify their name, social security number or driver license number to hide conviction or other past problems.
• In calendar year 1990, 2,255,000 California drivers had their driving privileges suspended or revoked. In that same year, 203,780 California drivers were convicted of driving with a suspended or revoked drivers license. In a 1987 survey of California drivers who were currently under suspension, 60% reported that they drove while their driving privileges were suspended or revoked.
• Also in 1987, 34 out of 100 drivers under license suspension were convicted of moving violations. Approximately 5 out of 100 were involved in an accident. (These were people who shouldn't have been operating a motor vehicle).
• One out of ten workers regularly use illegal drugs (reducing productivity 35% while increasing the likelihood of accidents and workers compensation claims.

Fraudulent resumes —False Credentials
It has been said that an employee who comes to a job under false pretenses is the wrong person in the wrong job. Many industry observers say that the practice of exaggerating or falsifying work related skills, experience and accomplishments is at an all time high.  Recent headlines speak for themselves. Public officials, top executives and others working in high profile positions have been found lacking the education, professional license, work experience and other credentials required for their position. Naturally, one might ask how a person could land a job without possessing the prerequisite qualifications. The answer is, unfortunately, quite simple:  Employers don't check adequately to verify the facts! 

A key point to consider is that a willingness to lie in order to obtain employment suggests a dangerous character defect that could resurface in another context at some future place and time.  Additionally, since many firms base compensation and benefits on a candidate's education and job related experience, the practice of submitting exaggerated or falsified credentials could be considered tantamount to theft. Often what you think you're getting in a job candidate is not always what you get.

Negligent Hiring
A legal minefield has been laid in the path of the already embattled employer. This latest legal trap is "Negligent Hiring." This legal doctrine essentially makes employers responsible for conducting "due diligence" background checks. Under the negligent hiring concept, employers may be liable for damages if an employee harms a third party and the employer knew or should have known that the employee posed a threat to the public—even when the misconduct was committed outside the normal scope of employment. Increasingly, courts are holding employers liable for "foreseeable" misconduct by their employees, when a reasonable investigation into the employee's past would have uncovered information that should have disqualified him or her for the position held that gave rise to the opportunity to do harm. This is particularly applicable to those employees working in sensitive public contact positions.  And, again, sadly, recent headlines speak for themselves from workplace violence to intellectual property theft, to creative bookkeeping leaving investors and/or shareholders holding the bag.

Negligent hiring is far broader than the old theory of "respondeat superior." Ordinarily, a plaintiff in a "respondeat superior" case would have to prove that the employee that harmed another was acting within the scope of the job description before the employer could be held liable. But under the negligent hiring theory, the employer could be found liable if it was found that the employee's actions were foreseeable.

The courts have not yet gone so far as to say that employers must conduct background investigations on every job applicant. However, the message that various juries seem to be sending is that some facts in a job applicant's background should be disqualifying for a given position, such as a driver with a history of recklessness or driving under the influence, an accountant with a background of embezzlement or a supervisor with a record of violent assault. Since the risks cannot easily be quantified, employers are well advised to exercise the utmost care in the investigation and selection of all employees.

Past negligence cases have included a woman who was raped by a knife wielding resident manager (on parole for armed robbery) who let himself in to the victim's apartment with a passkey. The assailant's employer had performed a cursory check of the man's last job and a personal reference but the court found the landlord negligent. In another case, a plumber (convicted burglar) learned of a crawl-way under a customer's house allowing access to the outside into the interior. He returned 2 days after the plumbing job was finished and looted the house.

In these and hundreds of similar cases, the employer was found liable for sizable damages, even though it was argued that their employee's misconduct was outside the purview and scope of employment. Other legal risks include negligent retention, sexual harassment and wrongful termination lawsuits. Diligent employment background investigations can help determine if a prospective employee is likely to be a valuable asset, or an unreasonable liability.

Holway v. Snelling Temporaries
November 1992: Jury holds employment agency liable for $5.5 million for negligently failing to conduct background check.

Relatives of a Santa Rosa California woman who was stabbed to death by a temporary office worker were awarded $5.5 million by a Sonoma County jury. The jury found that the employment agency was negligent in failing to perform a background check despite the fact that the worker's employment history reflected a 5-year gap and listed two prison addresses among his references. The worker turned out to be a paroled murderer.

McDonalds Ordered to Pay $210,000.00
McDonalds was ordered to pay $210,000.00 to a child who was molested by one of the company's employees. The employee had been hired under McDonald's McJobs program for disabled workers on the recommendation of a Colorado state counselor. McDonalds was held liable under the negligence theory for hiring the worker despite a prior conviction for child molestation. McDonalds was unaware of the conviction and failed to perform a background check to uncover that information.

The High Cost of NOT Conducting Thorough Background Checks
Avoiding legal problems is just half the battle. Employers must take into consideration the additional losses associated with hiring mistakes. Recruiting, hiring and training expenses averages over $6,000 per employee. Consider also lower productivity due to absenteeism and poor worker morale, sick leave abuse and high accident rates which hike up insurance costs. Employers are discovering that an affordable background check is a minor investment that can return major dividends.

So, it seems that today's employers have some important decisions to make with regards to employment investigations. Either do them or not do them, conduct the appropriate level of investigation (in whole or in part) in-house, or use the services of a professional background-checking agency capable of providing any level of service required.

The decision not to conduct uniform and consistent due diligence background investigations, regardless of the rational used, places a company at significantly greater risk of incurring the various losses previously mentioned. Setting up a capability to conduct background investigations in-house is certainly an option, but viable only for those larger firms that possess the financial resources, a large preexisting security staff and in-house investigative expertise. In any event, installing a strong background investigation capability in-house means adding fixed overhead to acquire the necessary know-how and information resources. Unless an employer performs hundreds of investigations per month, it is difficult to justify the expense of additional staffing, space, furnishings, fixtures and equipment etc. Therefore, the vast majority of businesses are turning to outside services providers to research and verify the backgrounds of their job applicants.

NOTE: NOTHING HERE IS OFFERED AS LEGAL ADVICE. EMPLOYERS ARE ADVISED TO CONSULT WITH QUALIFIED LEGAL COUNCIL FOR VERIFICATION OF THESE AND OTHER EMPLOYMENT LAW MATTERS.

Background Solutions: Employment History Verification | Criminal Records Search | Motor Vehicle Report
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Department of Health & Human Services, Office of Inspector General, List of Excluded Individuals/Entities
Excluded Parties List System | Professional / Personal Reference Interviews

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