From a worker who is unqualified for the job to an employee who steals from the office, bad hires are potentially costly. How much so? According to the U.S. Department of Labor, the price tag on the average bad hiring decision is equivalent to 30 percent of the individual’s first-year earnings. Fortunately, careful pre-employment screening can go a long way towards ensuring only quality professionals join your team—but the process has to be compliant. Consider the following background check mistakes that can take a big bite out of your business bottom line.
Failure to Request Permission to Run a Credit or Background Check
Under the Fair Credit Reporting Act (FCRA), employers must obtain jobseeker approval before accessing credit, criminal or other records as part of a background check. Titled “A Summary of Your Rights Under the Fair Credit Reporting Act,” a new version of this document was released by the Consumer Financial Protection Bureau in early 2013. Some employers have already been subjected to multi-million dollar lawsuits for using the old version of the document. Failure to obtain written permission at all carries a penalty of $2,500 per violation.
Failure to Send Adverse Action Notices
The FCRA also requires employers to notify jobseekers in writing if they intend to take “adverse action” due to the information a credit or background check reveals. In the case of a job application, adverse action means employment disqualification. The employer must provide jobseekers with both pre-adverse action and post-adverse action notices that include the contact information for the credit or background check company and advises them of their rights to dispute the accuracy or completeness of the information. In 2009, the Federal Trade Commission took action against two freight services companies that rejected applicants based on background checks without informing them of their FCRA rights. The companies paid $77,000 in fines.
Rejecting All Convicts and Felons
In 2012, the Equal Employment Opportunity Commission (EEOC) issued guidelines to employers for use of the information obtained through criminal background checks. To avoid potentially discriminatory hiring practices, the guidelines encouraged businesses to consider factors such as type of crime, whether it was an arrest or conviction, and how long ago it occurred before denying an applicant employment. Earlier this year, Pepsi Beverages agreed to pay $3.13 million after an EEOC investigation revealed the company’s criminal background check policy discriminated against African Americans.
Failure to Conduct a Thorough Background Check
Conducting an incomplete background check—or failing to verify a jobseeker’s background at all—can expose your business to a negligent hiring lawsuit should the new employee endanger or injure another worker. According to the U.S. Department of Labor, assaults and violent acts accounted for 18 percent of business fatalities in 2009. Should an employee, client or vendor sue your organization as a result, the National Institute for Prevention of Workplace Violence reports verdicts in favor of the plaintiff have been as large as $40 million.
If you’re concerned that your pre-employment screening policies may not comply with current state and federal laws, consult your legal advisor or a human resource professional.