Negligent Hiring: Employer Risk
By William Hauswirth
You've conducted the interview, found the perfect candidate, and made the employment offer. Now just have the person start immediately, right? Wrong.
What companies don't know about a job applicant can hurt them.
Most businesses and organizations are familiar with negligent hiring. But are all taking the necessary steps to avoid bad hires? No employer is invulnerable to litigation resulting from negligent hiring practices. And in a weak economy, with theft and violent incidents increasing, it's essential for employers to establish effective risk prevention measures.
If recruiting and hiring practices are careless, a company can face unexpected and unwelcome consequences. Negligent hiring resulting from one bad hire could embroil a company in a lawsuit, resulting in potentially detrimental financial consequences and damage to the company's reputation — classic risk management dilemmas.
Furthermore, as a result of negligent hiring, a company can be sued if an employee injures or harms another employee, especially if the company could have foreseen a problem but did not do a thorough check of the new employee before hiring. According to a 2001 report by Public Personnel Management, employers have lost more than 79 percent of negligent hiring cases.
In today's struggling economy, employers who don't know the individuals working for them are leaving their business wide open to liability. The increasing number of court decisions ruling in favor of the plaintiff based on negligent hiring and retention laws has put mounting pressure on companies to obtain more detailed and accurate information on prospective employees. Employers are held accountable by the courts for negligent actions of employees — especially when information was available that employees were unfit for their jobs — before or after hiring. Companies should obtain more comprehensive information on applicants by mandating that all job prospects complete an application that complies with employment laws. Employers must then receive written permission to verify the form and perform a comprehensive background check.
It's necessary for employers to perform due diligence by conducting background checks on every employee hired, regardless of the size of their workforce. If an applicant is unfit for the specific work to be performed, or for employment in general, a background check is likely to disclose this. If the background check fails to reveal such information, companies can hire the individual without being considered negligent.
Companies could dispute that the cost of conducting background checks is prohibitive. But the cost of not performing due diligence resulting in negligent hiring can be far greater. Violence, theft, and drug use are reasons alone to prescreen applicants. Even if an applicant is a referral, it doesn't mean he or she is a quality employee. Further, the consequences of shortcutting these simple steps can be devastating — ranging from massive financial settlements, bad publicity, and, in the worst case, loss of life.
In a 2008 report released by the U.S. Bureau of Labor Statistics, 13 percent of the 5,840 workplace fatalities that happened in 2006 were the result of assaults and violent acts. And a recent article released by Human Resources Management noted the average settlement of a negligent hiring lawsuit is nearly $1 million. In the event that employment background checks were not conducted, the employers in those cases could be held liable for the incidents.
While many negligent hiring claims involve drastic but isolated incidents of employee violent conduct, the risk of being a defendant against such claims and the damaging consequences surrounding them far outweigh the time and cost of taking the steps to prevent them. As a general rule, a company's first line of defense is to eliminate high-risk applicants before making hiring decisions.
Employers never want to say "we should have known" when it relates to an employee's behavior or inexcusable act. While there are no hard and fast rules to help identify a potentially dangerous employee, employers with a reasonable and consistently followed preemployment background-check process can greatly reduce their exposure to negligent hiring claims. By doing so, companies lower their chances of hiring the angry, negative employee who can drain the morale of an organization and perpetrate workplace violence. Employers have a legal obligation to protect their employees, third parties, and the community from any foreseeable acts of an employee.
While customers are undoubtedly the driving force behind many companies, an organization's employees are critical to its overall success. Employers intending to develop a healthy, safe, and secure workforce and working environment must protect themselves, their company, and their employees to minimize the risks from potentially hostile sources. Along with employment policies and sound risk management procedures, businesses must stay current with the ever-changing laws that affect the employment relationship. A reasonable investment in time and effort at the outset can minimize risk, assist in deterring unscrupulous individuals, and save significant dollars in the long run.
William F. Hauswirth is president of ISO's Intellicorp Records unit. IntelliCorp (www.intellicorp.net) helps businesses and organizations reduce exposure to fraud, workplace violence, and negligent hiring lawsuits.