8 Must Follow Risk Management Tips for Hiring 8 May 2017


No employer wants to make a bad hiring decision or deal with the fall-out from one. The consequences of bad hiring decisions can range from lower morale and lost productivity, to theft or property damage, to violence towards colleagues or the public. There’s also the risk of negligent hiring lawsuits that might follow. Any one of these outcomes can cost an employer hundreds of thousands to millions of dollars.

The sums resulting from even a single lawsuit or occurrence can be enough to bring a company to its knees. So what’s an employer to do? The short answer: take steps to mitigate your risks. Fair enough, but exactly how is an employer supposed to do that? While there is no magic formula that guarantees a perfect – or even a good – hire every time, there are some things you can do that should help you minimize your risks considerably. Here are 8 tips to get you started:

1. Mandate a Company-Wide Policy

Mandate a company-wide commitment from the top down to mitigating risk and promoting a safe workplace and develop policies to put that commitment into practice. Workplace violence appears to be a growing threat. We hear more and more stories on the news of shootings or other incidents that came as a surprise to many only to learn that many such occurrences could have been prevented. You cannot prevent violent occurrences without a commitment from top management to creating and maintaining a safe workplace. The policies you create are your first real demonstration of that commitment. Of course you must also make sure that you apply and enforce them consistently.

2. Criminal Background is a Must

Include in your policies a pre-employment screening policy that in turn includes criminal background checks. Unfortunately, many employers learn after an occurrence of theft, violence or other misconduct that an employee had a criminal history that, if checked, would have indicated a risk of the very conduct that has caused injury, significant financial losses, or worse, death. A criminal background check does cost money, but not nearly as much as a lawsuit, or the amount involved in employee theft. When someone gets hurt or sustains heavy losses as a result, an employer who would have known the employee was not an appropriate hire if it had run a criminal background check risks at least one negligent hire lawsuit. Even one lawsuit can result in a multi-million dollar verdict or settlement and then there are legal fees incurred to defend the lawsuit.

3. Know the FCRA

Follow all FCRA requirements when running a criminal background check (or credit report). You can read our previous articles for specifics on the FCRA requirements. In general though, if you use a third party to get someone’s criminal or credit history, you must provide written disclosure to job applicants and get their written consent before you run the background check. You must also provide certain notices, and an opportunity to explain or dispute negative entries before you reject an applicant. The FCRA’s provisions are not hard to follow. To many employers they seem like a procedural formality. If you take this approach and you decide to ignore the FCRA requirements, you may find yourself facing a lawsuit here as well. Remember, even if a lawsuit is dismissed, and even when the judgment or settlement amount is relatively low, you will still also incur significant fees for your legal defense.

4. Find the Right Partner

Exercise proper care in selecting a vendor for background and credit reports. Background checks and credit reports can contain inaccurate information. When the screening company is less than careful about entering in the right personal information or making sure that the report matches the person being checked, the risk of an employer making a hiring decision based on wrong information multiplies. If that’s not enough, many employers are taken in by online background screening companies promising fast results, low fees and no need to get the applicant’s consent beforehand. Any company making even one of these promises probably does not comply with the Fair Credit Reporting Act. If you hire this type of company to run your criminal background and credit checks, you could find yourself facing a complaint from the Federal Trade Commission (FTC) or even a lawsuit. Penalties, fines and damages increase, often to staggering amounts, with the number of FCRA violations. We wrote about this issue in our article, Beware of Non-FCRA Background Screening Companies.

5. Customize Your Screens by Position

When feasible, conduct a position-specific search, using multiple screening tools. Each position carries different job functions, and with that, varying levels of risk. A mail room clerk may require one level of due diligence, whereas a Staff Accountant or Chief Financial Officer might be someone you should not only check more thoroughly, but also check for specific types of criminal offenses, in addition to requesting a credit report. On the other hand you may want to make sure that none of your employees have a criminal history that involves violence. In other words, some of your screening process may apply to all of your employees, whereas you may only use other aspects for certain types of positions. The type of screening and tools you use will vary accordingly.

6. Create Disqualification Criteria Before a Search

Decide in advance, what type of information will disqualify a candidate for the job in question. The EEOC, and a number of state laws limit how and when you can reject a candidate based on criminal history. Generally, criminal convictions have to be relevant to job functions or safety and well-being of other workers or the public. A blanket exclusion of any candidate with any criminal history will likely violate EEOC guidelines and a number of applicable state and local laws. Assuming the state(s) in which you employ people do not set specific time limits, you should also decide how far back into someone’s criminal history you want to search. (Please note that rejecting a candidate based on an arrest alone is often illegal.) For example, if you are looking for an accountant or accounting clerk, rejecting a candidate with an embezzlement conviction from 4 years ago is unlikely to cause you problems regarding EEOC guidelines or state or local laws.

7. Always Include Authorizations & Disclosures

Consider including authorization and disclosure forms in a hiring package. Many state and local laws now prohibit asking about criminal history on a job application. Some may even prohibit background or credit checks before you have either interviewed or extended a conditional job offer to the candidate. In most cases the best practice will be to include an authorization and disclosure in a hiring package when you have extended a job offer. You can condition the offer on a satisfactory criminal background and/or credit check. Please remember that the authorization and disclosure forms must be separate documents. Do not make them part of a job application, Employee Handbook or any other form, and do not include any other language (such as release of liability in these forms), or you risk being found in violation of the FCRA.

8. Monitor Compliance with Pre-Screening Policies

Policies and procedures can be invaluable in managing hiring risks and minimizing legal liability—if you and your employees actually follow them. Make sure you properly communicate these policies and procedures to all employees. You might even want to conduct periodic training—and then, monitor those employees’ compliance with those policies. Even the best-written policies will be of no help to you if you do not make sure that your employees are following them.

In addition to the above, some employers also periodically require background checks for current employees. Personal history, including criminal backgrounds, can change after the hire date.

While the above is not an exhaustive list, and cannot cover every conceivable issue, it should go a long way toward ensuring a good hiring decision, and minimizing the risks of a problematic hire.