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Are Employee Background Checks Worth the Cost?

Author: Robin for Stratton Date: May 03, 2013

Employee Background ChecksCertain business types more appropriate for pre-hire background checks

Given the wrong prospective employee, the cost for a small business to conduct a background check could pale in comparison to the potential liability.

"Oh, yes, background checks can be a very cost-efficient method of helping a small organization find people who are the right fit, especially when compared to the costs of a hiring mistake," says Manesh K. Rath, an attorney with Keller and Heckman in Washington, D.C.

A 2004 traffic accident in Virginia illustrates this idea in a fairly simple way. A tractor trailer driven by Kristina Arciszewski, an independent contractor, crossed the median and caused a head-on collision with another tractor trailer driven by Winford Dallas Jones on Interstate 81. Jones suffered a concussion and multiple arm and leg fractures while Arciszewski died at the scene. Jones sued the trucking company for which Arciszewski worked through "vicarious liability" and the third-party logistics firm that selected the trucking company.

The Virginia Supreme Court ruled that the plaintiff had to prove that the contractor was incompetent or unskilled for the job; that the resulting harm arose from that incompetence; and that the principal knew, or should have known, of the incompetence. The court also allowed a jury to decide the question as to whether the harm arose from the third-party logistics company’s incompetence.

No employer wants to face that kind of incident or potential legal liability.

Where to Turn for Help

Professional security companies can conduct searches for as low as $10 or as much as several hundred dollars for more detailed information, says Christine Cunneen, CEO of Hire Image in Johnston, Rhode Island. Cunneen, who is an NFIB member, says that for about $50, a company can get a "thorough, good search."

She recommends searching for a vendor via the National Association of Professional Background Screeners (NAPBS), of which she serves on the board.

Don’t use online services, advises Cunneen, because some states, like the six New England states in the region in which she lives, do not even sell their data to online services. She called them, "garbage in, garbage out."

Most Susceptible Businesses

Several types of businesses should definitely consider conducting background checks, suggests Rath, the attorney. Among them:

  • Hospitality industry businesses, including any who deal directly with cash or deposits.
  • Businesses that deal in the commercial services industries (including licensed employees), such as those in the banking and credit union industry, and also those that might be unlicensed, like financial planners.
  • Property management companies, especially those whose services include the need for employees to enter homes to perform repairs and maintenance.
  • Businesses involved in home nursing and home-based healthcare, such as therapy services.

Rath also cautions employers to leave the background checks to the pros, ensuring vendors they work with, like Hire Image, can filter out certain information so it never finds its way to the employer. "This includes information, for example, on non-convictions, misdemeanors or charges that don’t necessarily relate to the applicant’s ability to perform their work in a trustworthy manner," Rath says.

RELATED: Can My Business Run a Background Check Before Making an Offer of Employment

Types of Checks Available

On its website, Hire Image says it can report to clients within 24 to 72 hours of a request (that time can be longer or shorter, depending on several factors).

Types of checks a potential employer should conduct include:

  • Criminal background check
  • References at prior jobs
  • The applicant’s education

Before searching for such information, the employer should fully disclose the nature of the search in the form of a signed legal release. Legally, employers are limited to the past seven years for non-criminal information.

The check should be related to a job necessity, such as cash management and access to financial information. When making a hiring decision, employers should focus on the seriousness of the crime and the length of time since it has occurred.

In addition to potential legal liability in the form of a plaintiff’s lawsuit, employers could be subject to fines from the Federal Trade Commission for violating the Fair Credit Reporting Act.

Also, know what the law is in your state. Eighteen states have proposed or enacted legislation limiting background checks.

RELATED: What You Need to Know When Using Criminal Background Checks in Hiring

Watch the NFIB webinar on Latest in Employee Background Checks: Avoid Discrimination and Comply with Fair Credit Reporting Act

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