Negligent Hiring – The Million Dollar Mistake

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One million dollars… What is it besides a lot of money for the average person? From 1992 to 2001, the average cost to settle a negligent hiring lawsuit was roughly one million dollars. And that is conservative. The highest award in the United States for a negligent hiring case was $26.5 million, a substantially higher number. So, what is negligent hiring and what can you do to protect your organization from it?

Negligent hiring is defined as failure to use due care or action given the risk provided by the position being given. Though employers are not traditionally responsible for an employee’s actions, unless under the scope of their job, they can be held responsible if through their negligence an employee harms another person.

In the rather high profile $26.5 million award, a home healthcare worker entered a client’s home and robbed and brutally murdered both the client and his grandmother. The Healthcare organization had not performed a background check. Had they performed a check, they certainly would have uncovered the six prior felony convictions that would have enabled them to reasonably presume that the man was a risk to work with sensitive populations. While this case was extreme, it sets the stage for the trend to hold organizations accountable when a potentially risky situation could be considered foreseeable.

While in the big picture, the average settlement or case award for negligent hiring will typically not put a company out of business, the costs associated with a negligent hiring case can linger both in tangible and intangible costs. Towards the bottom line, companies involved in negligent hiring suits must pay settlements, attorney fees, and increased liability insurance. More important are the negative consequences that some companies face that mar their reputations for the long term, including negative publicity, loss of credibility, loss of employees, potential backlash from Wall Street, and difficulty attracting new talent.

In order to avoid negligent hiring or retention situations, consider a few basic best practices:

Ensure the due diligence is equivalent with the risk – Not all positions provide the same level of access to people, facilities, and systems. The depth of the background check should be commensurate with the risk. The likelihood that your CEO has the same physical access as the summer intern is unlikely. Treat the types of background checks you perform as relevant to the position and level of access as possible. Particular attention should be paid to those that will have access, and potentially unsupervised access, to sensitive populations like children, elderly and disabled.

Maintain consistency in your program and policies – If your policy states that you background check at a certain level and it is found that you didn’t perform a check at that level, then it may be used against you in a potential lawsuit.

Document everything – In a court of law, if your Human Resources or Security department have not documented parts of their research or background check then it is as if your research never occurred. Document all background checks, conversations with previous employers, etc. to ensure a complete view of any bad hire.

Perform periodic audits – Perform periodic audits of your background screening program and the HR/Security processes and policies. Ensure that they are consistent and applied across the board.

Perform background checks upon promotion – Think about background checks when a person receives a promotion or when access or risks are added to a position. Many times the initial position may not provide the level of access as the new position, yet the preliminary screen continues to be used.

Define your extended workforce screening policy – A clearly defined program regarding temps and contractors should be outlined, as companies have less control over the quality of hire at another organization. Ensure that a background check that meets your specifications is being performed on indirect employees prior to providing access to your facilities or systems.

Benchmark against others in your industry – To avoid litigation and to succeed in a case, companies must be able to show that they are doing as much, if not more, than their peers from a criminal history check perspective.

Confer with your legal department – Make certain that you check with your legal department about any controls and policies that you need to enforce to ensure your organization promotes the safest environment possible for your employees and clients.

With these best practices in place, you are one step closer to avoiding a, potentially very costly, million dollar mistake.

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HireRight is a leading provider of on-demand employment background checks, drug and health screening, and electronic Form I-9 and E-Verify solutions that help employers automate, manage and control background screening and related programs.

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The HireRight Blog is provided for informational purposes only. It is not intended to be comprehensive, and is not a substitute for and should not be construed as legal advice. HireRight does not warrant any statements in the HireRight Blog. Any statutes or laws cited herein should be read in their entirety. You should direct to your own experienced legal counsel questions involving your organization’s compliance with or interpretation or application of laws or regulations and any additional legal requirements that may apply.