The cost associated with hiring a new employee can be quite substantial. Think about the processes involved and the expenses for recruiting, training, benefits and pay. Now think about hiring someone that you did not do a background check on. The expense of the new hire may have been costly, but imagine what the expense will be of a negligent hire and the lawsuit to follow. Not a pretty picture.

The statistics below illustrate the value of conducting background checks on all potential and existing employees:

• The US Department of Labor claims that “the average bad hire‟ that leaves a company within six months costs the company approximately $40,000 in severance pay, training, wasted human resource time, possible search firm fees, loss of productivity and impact on employee morale.
• Considering hiring, training, productivity loss and vacancy, some estimate the cost of turnover at about 150% of annual salary. (Source: Saratoga Institute)
• 34% of all forms contain outright lies about experience, education and ability to perform essential functions to the job. (Source: Wall Street Journal)
• 30% of all business failures are caused by employee theft or embezzlement. (Source: American Management Association and US Chamber of Commerce)
• Employers lose over 70% of negligent hiring cases with an average settlement of over $1.6MM. (Liability Consultants, Inc.)
• 10% of all job applicants have a criminal history. (Screening Index, 2009.)

• Scott Thompson, former CEO of Yahoo!, lied about details of his college degree
• Ron Zarrella, CEO of Bausch & Lomb, admitted he did not graduate from Business School as noted on his resume
• David Edmondson, former CEO of Radio Shack, claimed he graduated with two degrees, he didn’t
• George O’Leary resigned as Notre Dame Football coach five days after being hired, he lied on his resume

• A nursing home was found liable for $235,000 for negligent hiring of an unlicensed nurse with 56 prior criminal convictions, who assaulted an 80-year-old visitor. – Deerings West Nursing Center v. Scott
• An employer settled for a $2.5 million suit seeking to hold it liable for negligent hiring, and entrustment of an intoxicated security guard. The guard had an on-duty traffic accident in a company car which killed him and another motorist. – Butler v. Hertz Corp
• A $5 million settlement was awarded to the family of a deceased female tenant against the apartment complex owner and management; the suit claimed that the tenant was killed by the brother of the complex’s assistant manager, and that it was negligent hiring to hire an assistant manager without a criminal background check. – Liebman v. Hall Fin. Group, Inc
• A vacuum cleaner manufacturer was liable for $45,000 because one of its distributors hired a door-to-door salesperson with a criminal record, who then raped a female customer in her home; (manufacturer should have required its distributors to do pre-hiring screening of door-to-door salespersons to prevent hiring of persons with criminal histories). – McLean v. Kirby Co.

The following sites may assist in your pre-employment screening:

• Fair Credit Reporting Act
• Americans with Disabilities Act
• Drivers Privacy Protection Act
• U.S. Equal Employment Opportunity Commission
• Employment Law Information Network
• Society for Human Resources (SHRM)
• EEOC Enforcement Guidance
• HRLF – HR Leadership Forum
• Consumer Financial Protection Bureau