Return to Table of Contents

Risk Managers' Forum

Good pre-hire screening is good risk management

Legal risks are two-fold: Not screening thoroughly enough and violating an applicant's legal rights

By W. L. Richard, CIC, ARM, AAI

It has been said that if you hire the right employee, there is almost nothing you can do to mess it up. However, if you hire the wrong employee, there is almost nothing you can do to fix it.

A significant number of personnel crises affecting agencies involve employees who should never have been hired in the first place. From an employee with a history of violence who threatens or harms a coworker or customer to an accomplished embezzler who methodically steals financial assets of the agency, hiring the wrong person for the job could be a serious inconvenience or it could trigger a crisis that threatens the ability of the agency to achieve its mission.

According to a survey conducted by Right Management Consultants, the replacement cost of a bad hire is one to five times the salary of the job in question. Consider the direct and indirect cost of recruiting and hiring, the direct and indirect cost of training, and the wasted wages and benefits. Also, consider the management, administrative, and legal costs of a bad hire, plus the direct and indirect cost of damaged or stolen funds, materials, and equipment. Also take into account any negative effects on the work environment, customer goodwill, and employer reputation. Verifying information from the job applicant helps the agency make the right hire the first time and is clearly worth the investment.

Save yourself wasted time and money down the line by knowing whom you are hiring up front. Lawsuits, grievances, loss of productivity, low staff morale and lost customers are some of the possible side effects of a bad hire.

Employers have a moral and legal obligation to provide a competent workforce and a safe work environment. An employer can determine if a potential employee is appropriate for the job and work environment by learning whether the applicant has the experience, education, and training required to succeed at the job.

A basic risk management procedure is to verify the facts presented by candidates via their résumés, applications and in the interview prior to making the offer.

• Does the person have the experience, knowledge, skills, and attitude to do the job?

• Did the person really graduate from high school?

• Was the degree listed and required for your job opening the one earned, and was it from the institution listed?

• Did the person actually work for each of the listed employers and for the times stated?

• Do the job titles check out?

• Does the person have the credentials/licenses listed that are needed for your position, and are they current?

In the rush to fill the job with this wonderful prospect, or just fill the job so you can continue fulfilling the agency's mission, fact checking is easy to overlook or rationalize away. Shortcuts to the hiring process include:

• "Comes from a good agency."

• "Was recommended by a friend."

• "Seems like a nice person."

• "I'm a good judge of character."

• "My gut has never been wrong."

While not a panacea, careful screening of the potential employee is an important risk management strategy. The failure to adequately screen applicants may place other employees and even customers in dangerous situations.

Why risk going outside the process, when fact checking can be as simple and inexpensive as several phone calls? The process itself is an important risk management strategy. If you're questioned formally about why a person was or wasn't hired, you can show that your procedure for screening prior to making the job offer is consistent for each applicant.

Should screening alert you that education and experience have been misrepresented or are totally false, you can decide how you wish to proceed or if you even wish to proceed with this candidate.

To balance the résumé and application fact verification, always check references before making the final job offer. Ask the candidate for a minimum of three names of people who aren't related to the candidate and who can speak to the candidate's past job performance. You'll also want the candidate to provide written permission to check references and to waive his or her rights to bring action against anyone providing or seeking information related to employment.

Just what illegal acts and policy abuses do you hope to avoid? The U.S. Chamber of Commerce calculates that one-third of all business failures result from employee dishonesty such as theft of cash, merchandise and supplies, or abuse of workers compensation and sick time. Another area of loss is personal vs. job-related Internet research and e-mail, which uses both the organization's equipment and time. You probably want to review your personnel policies to make certain your expectations for employee performance in these areas are covered.

Checking the criminal history records of applicants is one valuable tool in a comprehensive screening process. Keep in mind that a criminal history record check is part of a screening process—not a selection criterion. Before incorporating criminal history record checks into their screening processes, an agency should establish screening criteria—clear guidelines stating which offenses are relevant; what offenses will disqualify an applicant; what other factors will be considered; and how the rights of the applicant will be preserved.

Remember, applicants have the right to be treated fairly and to have their privacy respected. Employers are responsible for protecting these rights and may need to establish and implement policies that achieve these objectives. Criminal history data bases are not perfect and sometimes a records check will falsely identify a person as having committed a crime. For this reason, applicants should be given a chance to challenge the accuracy of information that an organization receives.

The absence of any specific legal requirements may not relieve an agency of its obligation to protect the privacy of the applicant. Due to the sensitive nature of the information that an agency may receive, an agency should take steps to prevent its accidental disclosure. Establish a policy governing who has access to the information, how it is stored, and how it is to be destroyed once it is no longer needed.

As you can see, from a risk management standpoint, screening can be a perilous activity.

In addition to employee exposures, there are legal risks associated with a thorough screening process as well as risks in not screening.

Legal risks associated with not screening can be significant. The basic legal standard that applies is "reasonableness under the circumstances." If an agency's screening process is challenged in court, a judge or jury will evaluate the reasonableness of the process employed; the foreseeability of the risk (whether the agency knew or should have known of the risk of harm), and whether the screening process, or lack of it, caused or contributed to the harm at issue. An opponent may well argue that failing to conduct any screening is unreasonable.

There are two basic categories of legal risk in screening:

• The risk of not screening thoroughly enough.

• The risk of violating an applicant's legal rights.

Under the first scenario, the potential exposure involves someone injured by an employee who was unfit for service. Liability is imposed when a court determines that the employer should have known that the applicant posed an undue risk. Under the second scenario, the likely exposure is an applicant who was rejected. There are no hard-and-fast legal rules about screening. Liability for negligent screening requires a thoughtful analysis of the circumstances.

So, what's an appropriate and effective screening and fact-checking system?

Step 1: All candidates should complete an application form that includes a waiver giving the employer permission to verify information supplied during the hiring process and promising not to bring a lawsuit against the employer or the person supplying the reference due to information supplied in the process. The application can also include a statement to be signed by the applicant indicating that providing false information during the hiring process is grounds for immediate dismissal should the applicant be hired.

Step 2: Assign one staff member the task of verifying factual information provided by applicants on their résumés, application forms and during the interviews, as well as checking references. The person should be trained to probe for specifics, such as, "He improved our accounts receivable process, which evened up our cash flow," and not accept general statements, such as "She was an effective employee."

Step 3: The staff member should use a preprinted form or checklist for each applicant to keep track of the information verified, for example, level of education, degrees, licenses, and dates of employment with previous employers. Check a five- to seven-year work period.

Step 4: Keep an "application pending" file for each candidate along with the checklist until all verifications have been received.

The bottom line is that screening potential employees is good risk management. It helps an agency achieve its goals and become more successful, thus leading to greater profits.

Finally, thorough screening helps:

• Reduce the high cost of turnover

• Screen in employees who stay longer

• Reduce losses from employee theft, employee fraud, drug and alcohol abuse, absenteeism, workplace violence, and litigation

• Avoid wasted benefits

• Reduce training and employee development costs

• Increase productivity through hiring employees with better work habits, attitudes, and behaviors.

• Enhance professionalism by "screening in" appropriate workplace attitudes.

•Decrease insurance costs. Some insurance companies will give background check or drug screening discounts to agencies that take such precautions.

The author

W.L. (Will) Richárd, CIC, ARM, AAI, is the managing partner of Insight Consulting Group and a co-founder of Certified Risk Managers International (CRM). He is also a faculty member and educational consultant for the National Alliance. For more information on the CRM program, go to:


Click thumbnail below to launch
story in our Flip Book edition

page page




Return to Table of Contents