Risk Management – KNOW who you’re hiring

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Risk Management


Raising the Case for Background Checks – KNOW who you’re hiring

Human Capital Transitions, President Facet
Member Firestorm Expert Council
Phil Brattin – Phil Brattin is the President of Compliance Background Screening Services (CBBS), a division of FACET.


Consider the two following true scenarios.

ONE:    A truck driver for a Texas hazardous waste company caused an accident that resulted in the death of one man.  The deceased’s estate was awarded $20.7 million by a jury that agreed with the plaintiff that the employer was negligent in hiring the driver without conducting an adequate background check on both his driving record and drug abuse. (From  National Law Journal’s “Top 100 Verdicts of 2007.”  )


TWO:  Plaintiff’s in a case in Florida held a defendant franchisor responsible for an investment fraud scheme which was allegedly operated out of one of the franchisor’s stores by a manager who was employed by a franchisee. The manager owned and controlled a   separate investment company through which the scheme was managed.


The plaintiff, from a series of investments with the manager’s separate investment company, lost a substantial amount of money. The investments were promoted by another employee and the general manager from several locations owned by the franchisee.


The plaintiffs were awarded a substantial amount in damages and prejudgment interest was added to the plaintiffs’ recovery.  The case is currently on appeal.

In the ever-changing world of work and particularly in these challenging economic times, it is critical for employers to hire and retain engaged, valuable employees.  Costs associated with workforce turnover can both frustrate and damage a company’s overall workplace culture.  Add to that the fact that many employers receive hundreds of applications for a few open positions.

Adequate, i.e. Fair Credit Reporting Act (FCRA compliant Pre-Employment Screening), background checks can be an effective tool when screening applicants for employment.  However, even though these reports may provide valuable insight into an applicant’s history, employers must be cautious in their use.

As a part of your Risk Management Plan, employers should evaluate their hiring policies and procedures to ensure compliance with laws and standards from recent litigation.

Pre-employment background screening has been increasing in frequency for at least a decade and especially in small and mid-size companies.   This growth is driven by several factors:

  1. Security concerns after 9/11
  2. Increase in negligent hiring/retention litigation
  3. Unclear and confusing laws around hiring practices
  4. Growing instances of workplace violence
  5. FCRA compliant background screening companies which provide more accurate information
  6.  Choosing a background screening company is not simple.  With all the new legislation and variations in state laws governing criminal records and credit histories, along  with the ease of movement and relocation of the workforce, accurate and adequate background checks are tricky waters to navigate.

    Employers should expect their background screening provider to protect them and to know when the employer should or should not ask for information.  The provider must know all of the various laws from state to state and advise the employer accordingly.

    Employers should also ensure that their provider is accredited by the National Association of Professional Background Screeners (NAPBS).  This not-for-profit trade association launched an accreditation program in 2003 which applies best practices for consumer protection, legal compliance and client education as well as standards for court researchers, data and verification.

    Given the potential for costly litigation to a company’s reputation, all employers, regardless of size, need to give serious consideration to background checks.

    As Stephen Wood, Chief Human Resources Officer of Dish Network Corp stated,

“Every day thousands of our employees are in American homes.  We cannot afford not to identify a felon, sex offender or something else during the background check.  If they do something to injure our brand – it is irreparable.”


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