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04/16/2007 The True Costs of “Cheap” Background Checks
There are costs for everything you do. And in some cases there are costs for things you don’t do. For employers the costs of not doing an adequate and complete pre-employment background check can mean huge damage awards, and possibly, the loss of a business.
A furniture company was found liable for $2.5 million for negligent hiring and retention of a deliveryman who savagely attacked a woman customer in her home; Tallahassee Furniture Co., Inc. v. Harrison.
28 year old Christina Appleton was stabbed to death by co-worker, Arvie Carroll, a convicted murderer placed with Iron Horse Vineyards by a temporary agency that did not conduct a background check. The case went to trial and the jury awarded the family $5.5 million.
Not only can employers be sued for negligent hiring and negligent retention should one of their employees harm someone, they can also be sued if they take action against an employee based upon faulty or inaccurate information. The case of James R. Gorman is a perfect illustration.
In less than three years, James R. Gorman became manager of $100 million in client accounts for The Vanguard Group. When Gorman's Pennsylvania insurance license came up for renewal, though, the company found a problem when performing his background check. Gorman had pleaded guilty to loan and credit card fraud. He was a convicted felon. So Vanguard did what any financial services company would do: fire him.
There was just one problem: They got the wrong guy. The James R. Gorman who worked for Vanguard had a different Social Security number, date of birth and address than the James R. Gorman whose conviction record had been unearthed. – (Barry Nixon - Security Products Oct. 2005)
Gorman sued Vanguard, the company that conducted the background check – Business Information Group, and the company conducting the licensing process. The companies eventually settled out of court for an undisclosed amount.
The above examples clearly demonstrate that as important as employee screening is, equally important is that that screening be thorough, accurate and complete. It is all to easy for an employer to be lulled into a false sense of security by a screening provider that promises in-depth research but actually delivers little more than online database checks. And employers that consider only price in choosing their screening provider may find that they have made a catastrophic mistake.
Comprehensive pre-employment background screening involves much more than a simple database check of publicly available records. Checks of this type are notorious for providing both false positives and false negatives. A false positive is where the person being investigated is mistaken for someone else, usually with the same name, who has negative information on his or her report. A false negative is when a supposedly complete background check fails to turn up important information, such as criminal convictions, about the person being investigated. Both these outcomes can subject an employer to legal action
Typically the legal action following a false positive will be in the form of libel, defamation, and/or slander. This is what happened in the case of James Gorman, mentioned above. Legal action following a false negative however is usually more severe, as it generally results after injury or death to an innocent third party as happened in the two multi-million dollar judgements cited earlier. False negatives can also place individuals in positions of trust within a company, where they can embezzle, or steal proprietary company information. While this won’t usually result in legal liability it can represent a substantial monetary loss to the affected company.
When it comes to employee screening there simply is no substitute for accuracy and thoroughness. An incomplete or inaccurate background check can, in many circumstances, be worse than no background check at all. Such sub-standard checks can themselves be used against an employer in a negligent hiring or negligent retention lawsuit.
Employers need to be aware that their choice of an employee screening company is as important as the applicant screening process itself. At the very minimum a screening company must provide reliable and accurate information, be aware of and conform to all of the legal requirements involved in the screening process, and provide knowledgeable and accessible customer service.
If you have decided that quality screening services make sense for your business, click on the link below and find out more about Foley Services comprehensive and affordable employee screening solutions.
or Contact:
Kirk Spooner
National Accounts Representative
1-800-253-5506 x469
KirkS@FoleyServices.com | 
