Finding the Wolf in Sheep’s Clothing – Why Do Background Checks for New Employees?

Kegler Brown Labor + Employee Relations Newsletter

Work-related violence is an increasingly widespread problem. (The National Crime Victimation Survey reports an average of 1.7 million incidents of violence in the workplace occur each year.) Employee theft and embezzlement continue to be frequent occurrences. Workplace harassment, including sexual assault, happens in virtually every business.

Imagine the following situation. You own a furniture rental company. You send a delivery man to a customer's house to pick up a roll-away bed. The customer allows your employee to enter her home and the employee, under the influence of drugs, assaults and attempts to rape the customer. After the customer sues the company, these facts are discovered: (a) in his prior job as a truckdriver, the employee admitted to using drugs and resigned from this job, (b) the employee listed on his employment application that was employed at two different jobs, in Oklahoma and Ohio, at the same time, and (c) the company did not contact any of his prior employers for references and did not conduct any background investigation. This case happened here in Ohio a decade ago, and the court allowed the customer's suit against the employer. The basis of the company's liability was "negligent hiring," and the reason why the company could be held liable to the customer was simple – if the company had investigated it would have learned of the employee's drug use and, presumably, it would not have placed him in a position where he could assault an unassuming customer.

The underlying principle is that an employer has a legal duty to act "reasonably" to provide a safe environment for its customers and workers. Of course, what is "reasonable" is like "beauty," in that it varies with the eye of the beholder. Unfortunately, 20/20 hindsight, viewed in the context of concern for a sympathetic victim, often provides more than a few "reasonable" steps that an employer should have taken, but did not. Specifically, the legal inquiry concerns what information the employer would have known or discovered through a reasonable investigation at the time the employee was hired.

In Ohio, as in most states, there is no legal duty to conduct criminal background checks for every job applicant. Instead, the scope of the duty to exercise "reasonable care" in hiring is largely dependent on the nature of a particular job in question. If a particular job entails a great deal of independence, freedom from immediate supervision, and personal contact with the public or other workers, an employer will be held to a higher standard to screen its applicants more closely. By the same token, where an applicant's disclosed history (or undisclosed inconsistencies) suggest an increased risk, the employer will be expected to act accordingly.

What can you do to protect against a negligent hiring claim? Do you opt to conduct extensive background checks on every applicant, thereby reducing your legal risk, but increasing your overhead hiring costs? Or, alternatively, do you choose to minimize costs associated with background checks, only to increase the risk of liability for negligent hiring? Here are some things to consider when making your decision:

  1. Be sure you utilize a comprehensive application form, and require that it must be completed fully by everyone you hire. Study the completed application closely. Be sure to investigate any inconsistencies or red flags (such as gaps in reported employment).
  2. Contact all of the references and past employers that you can, in person rather than by a written form. Ask to talk with the employee's supervisor, not the HR department. Ask the telling questions: "Would you re-hire this person to work for you again?" and "Why not?" While many former employers will shun your attempt to obtain information, you will be able to document the fact that you attempted to obtain information about the applicant in the hiring process.
  3. If you find any discrepancies, inconsistencies, or troublesome areas in the application or the reference checks, consider a more thorough background check, including a criminal records check.
  4. Consider performing thorough background checks, including criminal history, whenever you are hiring employees for sensitive positions, such as (a) those with autonomy, independence, and the ability to abuse their positions (such as high-level managers, managers of off-site locations, etc.), (b) those that will have unsupervised conduct with the public or with children (delivery or repair personnel, salespeople, childcare providers, etc.), and (c) those who will have access to your financial procedures and your company trade secrets or confidential information.
  5. Be sure that you thoroughly document all of the steps that you take, from the application-interview through any background checks, to serve as proof that you undertook a "reasonable" investigation. The importance of comprehensive documentation cannot be over-emphasized: it is as important as the investigation itself.

The doctrine of negligent hiring imposes liability on an employer that breaches its duty to care to reasonably investigate any risks posed by an applicant. In sensitive situations, like those involving unsupervised interaction with the public, the potential exposure can be extraordinary. In these circumstances, background checks can be the best defense against liability.